Cable operators are moving into the mobile market. Mobile operators are moving into fixed broadband. Sparks will fly!
American cable operators are using LTE networks as a backstop as they try to build up their own mobile networks. They’ve grown to about 2.6 million subscribers (not bad, but not enough). The big problem facing the cable companies stems from the high cost of their LTE backup networks. Recent financial data have allowed us to calculate the price that Comcast and Charter are paying to Verizon for LTE data. Shocking!
To solve their cost problem, the cable companies plan to bid on CBRS spectrum. They can build out their own LTE networks, using their convenient cable strands and some new sites, to reduce the percentage of data that relies on the MVNO network.
Where do we go from here? Mobile Experts has just completed some thorough techno-economic analysis on the future of the mobile business, as well as the future of the fixed broadband business. A key question in our minds is whether the mobile operators will be able to slash costs fast enough to become competitive with fixed broadband.
The answer is yes and no. The mobile operators will be able to use 5G, Massive MIMO, millimeter wave, CBRS, LAA, and other tools to drop their blended cost by a factor of 20 in some combinations of fixed and mobile data.
For their part, the cable operators are dropping their cost per GB substantially as well, implementing DOCSIS 3.1. We expect their cost per GB to remain lower than mobile operators for many years to come.
Let’s face it: hybrid fiber-coax is a very cheap way to move data around, and people use boatloads of data when they’re at home. The existing cable is a very sensible way to handle 300+ GB per month per household.
The cost per GB is only one factor. Another major factor has to do with the cost of coverage. Mobile operators think in terms of cost per square mile. Cable players think about cost to pass each home. Along these lines, based on the housing density there is a cutoff point for each technology, where investments in infrastructure become impractical. That’s where options such as Fixed Wireless Access come into play, using 802.11, LTE, or mm-wave bands.
In the end, the question is: Who will steal more customers from the other side? Cable is off to a highly visible start, with 2.6 million refugees from the carrier world. But mobile has its share of ex-cable customers as well. It’s not widely reported that at least 5 million Americans have no fixed broadband, and use "unlimited" mobile plans for their internet use. Many of these people are below the age of 30. They have never paid for fixed broadband, so they’re not visible in the churn stats.
After 32 pages of analysis on both capacity and coverage questions, we have come to some conclusions which we believe will lead to consolidation in the market. The big mobile operators and cable operators are likely to merge, because a "double play" of fixed and mobile makes real sense economically.
We’ve been watching the collision of cable and mobile for the past four years, and our old predictions still hold, now verified with some very precise quantitative cost analysis. It’s like watching two galaxies collide through your telescope… it seems like nothing is happening, but over time the result will be a combined entity with twice as much mass.
Joe Madden is principal analyst at Mobile Experts, a network of market and technology experts that analyze wireless markets. The team provides detailed research on small cell, base station, carrier Wi-Fi, and IoT markets. Madden currently focuses on trends in 5G, IoT, and enterprise markets for wireless infrastructure. Over 26 years in mobile communications, he accurately predicted the rise of digital predistortion, remote radio heads, small cells, and a mobile IT market. He validates his ideas with mobile and cable operators, as well as semiconductor suppliers, to find the match between business models and technology. Madden holds a physics degree from UCLA. Despite learning about economics at Stanford, he still obeys the laws of physics.
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