The economics, and opportunities, associated with broadband deployment have always been complicated. It’s been almost 20 years since I started using “demand density”, a measure of economic value that could be “passed” by a mile of broadband infrastructure and available to be hooked up and monetized. Since then, I’ve seen the maturing broadband market changing even that dynamic a bit. Overall demand density, over the operators’ footprints, by state, by metro area, may be useful in broad-strokes planning, but we’re now seeing a need for some micro-focusing as we consider what technologies are best in satisfying broadband needs and operator profit goals.
I pointed out in past blogs that within any given service area we tend to have pockets of concentration of demand/opportunity, and pockets where there’s not much going on. In New Jersey, my home state and a state where overall demand density is among the highest in the nation. We have large state-owned land areas where there’s nearly-zero residential or business population. But today, in the world where smartphone connectivity is as important (or even more important) than wireline broadband, even those areas may require broadband connectivity to support highways that move through them.
It’s also true that all of those pockets of concentration I mentioned aren’t the same. Obviously an important measure of the economic value of a “community” is the total spending that it can generate from both residential and business users. The question is how that can be realized, and that depends on a number of complicated factors.
One such factor is the distribution of residential income. Take two communities, one of twenty thousand residents and one of fifty thousand. Suppose the first community has twice the household income of the second. Is the second still a better opportunity because it offers more total income? No, for three reasons. First, higher-income communities are usually more spread out, so the “pass cost” to prepare to connect customers will be higher. Second, zoning rules in the first community will likely limit businesses locating there, which reduces the total network opportunity. Finally, households tend to spend a given percentage of disposable income on broadband, and higher-income households have more disposable income as a percentage of total income.
Another, growing, factor in opportunity measurement is the value of mobile coverage in the area. Going back to my New Jersey example, a mobile operator might have virtually no “direct” opportunity from residents in an undeveloped state-land area, but if a major highway supporting commuting or leisure travel passes through, or if there’s a popular business or recreational destination in the area, then lack of mobile broadband there will discredit an operators’ service to all who need it there, regardless of where they live.
One of the things that these factors have done is change the dynamic of fiber broadband deployment. Twenty years ago, Verizon dominated residential fiber broadband in the US because it had a high regional demand density and could therefore afford to push Fios to much of its service footprint. In the years since, AT&T started deploying fiber in its higher-density pockets, and new players have started to offer fiber in areas where the incumbent operator didn’t.
5G Fixed Wireless Access (FWA) is another development related to the intricacies of demand density. An FWA deployment is a single fiber-fed tower (fiber to the node or FTTN) that supports users in a rough one-mile radius. Because user connections are made via RF, the pass cost is limited to the cost of the tower and fiber feed; no trenching of fixed media is required. It’s no wonder that many sources say FWA is the fastest-growing form of broadband in the US.
Then there’s satellite. If you look at mobile coverage maps, you see that there’s a good chunk of most geographies where no mobile service is available, and it’s highly probable that there’s no fixed-media broadband there either. Satellite broadband is often the only broadband available in undeveloped areas, because the “node” is up in space and can serve a very large area without any other infrastructure deployment needed. Even in the US, there’s growing interest in satellite because it’s available everywhere, and it’s likely that some smartphones will support satellite broadband directly in the near future, supplementing their normal mobile broadband connections.
OK, so we have really two “broadband infrastructures” deploying. One is the physical-media “wireline” form that includes fiber, CATV, and some copper loop. The other is the RF form, which includes mobile broadband, satellite broadband, and FWA. The most significant thing happening in broadband is that second form, and in particular the mobile and FWA pieces. The reason is that these are “seeding” broadband infrastructure further into thin areas, making them “thick enough”.
If you have to push glass to a 5G tower or FWA node, wouldn’t it be possible to branch out from that point with fiber PON? Couldn’t the ability to serve a given thin location be enough to make that location more suitable for residential and business development? The more mobile and FWA we deploy, the more we reduce the incremental pass cost for even fiber to the home or business, because we have a closer feed point to exploit.
I’ve talked with some of the proponents of the “fiber broadband for all” thesis, and this is how the more thoughtful of the group see their goal being achieved. Is it realistic? I’ve tried to model that question, and while I’m not completely confident about the result for reasons I’ll note here, they’re interesting.
My model says that the current mobile broadband and FWA trends will, within 10 years, create enough “seed” points of fiber feed that almost 70% of the US households could be offered PON connections, and that would rise to almost 80% in 20 years. The qualification I’ve noted is that it’s nearly impossible to project economic, political, and technical trends out that far. The biggest caveat my modeling reveals is dependence on the cost and performance of FWA.
It is credible to assume that table stakes for home broadband in 10 years will be at least 500 Mbps download and 200 Mbps upload. If FWA can achieve that, that eliminates one risk to the model results. If technology advances in FWA could extend range (subject to topology) to 2 miles, that would eliminate one risk, and create another. At the 2-mile range level, FWA that meets basic service goals would be so much cheaper than PON that an FWA provider could undercut a PON/CATV provider on price, even in areas where PON and CATV are now dominant. In other words, we might have a kind of reversal of the impact of seeding, one where FWA starts to cannibalize the low-end piece of the fiber space, to the point where fiber growth would likely stop well short of the model predictions.
One thing that seems clear, more so for sure than the future of universal FTTH, is that broadband availability based on terrestrial tools is going to expand significantly in the next decade, in the US and in other developed economies. That likely means that satellite broadband will remain confined to under-developed countries and areas, and that terrestrial broadband will continue to improve, limited only by the willingness of operators to invest.