Altice USA’s CEO Dexter Goei offered additional details on his company’s plans to launch a mobile service in the first half of next year, including how the cable firm will handle every part of its planned mobile offering outside of running base stations and owning spectrum.
But it was Goei’s comments on 5G—including his response to Verizon’s launch of its 5G Home service—that highlighted exactly how this cable veteran views the wireless industry and how he thinks 5G might impact cable.
5G operators like Verizon and AT&T “have to go out and build very, very deep fiber networks with lots and lots of small cells in order to compete in high speeds [with cable], and in that case that is going to take them an extremely long time to do that before they are a credible threat to the cable industry on broadband,” Goei said in commenting on Altice’s third quarter earnings report.
Further, Goei noted that Altice in Europe has been testing 5G services, which he said gives him direct insight into the technology and exactly what kind of a threat it might pose to Altice’s U.S. operations.
“We know what it can do from a pure physics standpoint,” he said, “and we think what some of the wireless operators are talking about is probably at the far end reach of the realm of reality in terms of what we believe the propagation truly is.”
Finally, Goei offered a blistering assessment of Verizon’s 5G Home fixed wireless service.
“It is clear that what Verizon is currently launching is not a standard product today, and is not necessarily a commercially viable product going forward, as its on nonstandard equipment and really in a testing phase today,” he said, adding that "we don’t see a substitution of our fixed line product coming from 5G."
Goei explained that Altice customers today are using far more data than what fixed 5G services can support. Specifically, he said that 80% of Altice’s gross additions are subscribing to plans that offer 200 Mbps or more, and that data usage is increasing by 25% year over year. Indeed, he said that the top 10% of Altice’s customers are using 1 TB of “data download space.”
“That continues to rise,” he said.
"So, two years from now, if you want to fast forward, you'd expect that the entry level broadband speeds would no longer be 200 Mbps but something significantly higher,” he said. “The amount of data download speeds, or data downloaded that will be used, will be probably 50%-plus higher than they are today. And price points today for our 200 Mbps product is $45,” he added, pointing out that Verizon’s 5G Home service costs $50 per month for Verizon’s existing mobile customers. “So the economics are very difficult to understand how the technology of 5G can be substituting into what fixed line broadband can provide today, and moreover what fixed line broadband will be providing two or three years from now, when there's a true commercial launch out there."
Indeed, Goei’s essential argument against 5G and fixed wireless services—that they won’t keep pace with customers’ data demands—has been echoed by other cable industry executives. For example, Cable One’s Julie Laulis recently told S&P Global that “We have a really strong, robust network. And CableLabs is developing the technology that will make sure the [infrastructure] we've invested in has long, long legs. 10 Gbps is on the horizon. People have been prognosticating the death of cable for a long time, but we keep reinventing ourselves and it's because our network is so strong.”
And NCTA CEO Michael Powell recently described 5G as “25% technology and 75% marketing.”
For their part, AT&T, Verizon and other wireless operators have been loudly discussing the potential of 5G technology as they launch initial commercial services. For example, Verizon launched its 5G Home service last month, though the service runs on the company’s 5GTF standard and not the 3GPP’s standard. Verizon launched the offering in parts of four cities at 300 Mbps speeds for $50 per month for existing mobile customers.
Verizon has said it will upgrade the service to the 3GPP’s 5G standard at some later date. The service runs in 28 GHz millimeter-wave spectrum and therefore transmission distances can be measured in thousands of feet due to the spectrum’s propagation characteristics.
Nonetheless, wireless operators continue to pledge 5G growth. T-Mobile, for example, has said that it could become the nation’s fourth-largest in-home broadband internet provider by 2024 if it is allowed to merge with Sprint and launch a fixed wireless internet service.
But Goei’s outlook on 5G isn’t preventing his company from forming mobile plans. He said Altice remains on track to launch mobile service through its Sprint partnership in the first half of next year. He said the company would own its core mobile network as well as its HLR and its SIM cards.
“We basically own and control everything apart from spectrum and base stations,” he said, explaining that such a situation will allow Altice to offload data to Wi-Fi networks more easily.
He also said that Altice would “have maximum marketing flexibility with our full MVNO” and that it would be able to sell a standalone wireless product outside of a bundle, unlike what he described as “light” MVNOs. Goei’s comments are likely a dig at the MVNOs from Altice’s cable rivals Charter and Comcast, which both require their own mobile customers to also subscribe to wired internet services from the companies.
"We have a significantly lower wholesale price than light MVNOs, which means that we can be more profitable,” Goei promised.
Goei’s comments coincided with the release of Altice’s third-quarter earnings report, in which the company showed gains in revenues, earnings and free cash flow.