T-Mobile, Verizon FWA subs take center stage in Q1 forecasts

As the industry heads into the first-quarter reporting season, a lot of investor attention is focused on the fixed wireless access (FWA) space. 

In some ways, it’s a strange renaissance. The FWA space has been around in various forms for years – even decades, as Cowen investment analysts noted in a recent report. Of course, 5G gives it a new twist, and the debate over FWA is as spirited as ever, with T-Mobile and Verizon both pinning their hopes on long-term growth.

In a report earlier this week, investment analysts at MoffettNathanson identified FWA as perhaps the single most discussed controversy in broadband these days.

“Initially dismissed as impractical, or inferior to wired alternatives, FWA has enjoyed a dramatic resurgence, in both reputation and subscriber net additions,” wrote analyst Craig Moffett. 

It's quite possible that with no other significant 5G revenue streams cropping up, operators are looking to FWA as a saving grace. That’s one theory, albeit a bit dispiriting, Moffett acknowledged in a separate report earlier this year. That doesn’t fully explain why AT&T is mostly sitting out this FWA revival. Then again, AT&T is pinning its hopes and dreams on fiber, which is another way of reaching the same segment, so that may be moot.

If anything, the FWA space seems fraught with contradictions. For example, mobile operators like to point out that they’re using the same network for FWA as they are for mobile services, so it doesn’t cost them a whole lot more infrastructure-wise to offer fixed access as a service – the network’s already there. On the other hand, those fixed subscribers use a lot more data than the mobile users, therefore taxing the network. Is it worth the potential hit on the network if mobile subscribers end up with a less desirable service? That’s one of the question marks.    

To be sure, T-Mobile appears to be carefully curating where it captures subscribers to ensure they’re not overburdening the mobile network, the MoffettNathanson report noted.

Where are they coming from?

As to the age-old question of where these FWA subs are coming from, MoffettNathanson turned to Comlinkdata for more specifics than they’re getting from wireless company executives. Cable is typically the target, but DSL and other wireline customers are fair game as well.

Breaking it down further, Comlinkdata estimates 33% of T-Mobile’s FWA subscribers are in rural markets. Relative to the size of its footprint, T-Mobile FWA subscribers substantially over-index in ILEC-only (rural) areas and they meaningfully under-index in fiber markets where both cable and fiber are available, Moffett noted.

Further, Comlinkdata estimates 23% of T-Mobile’s FWA subscribers come from fiber markets, 52% from cable-advantaged markets and 25% from markets that are underserved by cable.

For Verizon, it’s a different story. Verizon’s FWA service is concentrated on dense urban areas where it offers service using millimeter wave (mmWave) spectrum. Therefore, Moffett said, it’s much harder to draw real insight, which likely will come once Verizon deploys more of its C-band/mid-band spectrum for FWA. (Verizon also offers Home internet service using LTE spectrum.)

According to Comlinkdata, T-Mobile’s FWA footprint passes 55.9 million homes (which is higher than the 30 million homes the company has disclosed) while Verizon’s Ultra-Wideband FWA footprint passes 3.4 million homes.

By the numbers

Verizon added 78,000 FWA customers in the fourth quarter of 2021, ending the year with 228,000. T-Mobile added 224,000 FWA customers in the fourth quarter, ending 2021 with 646,000 home internet subscribers.

The operators start reporting their first-quarter results next week, with AT&T leading off on April 21. Cowen predicts T-Mobile will post 230,000 FWA adds; Morgan Stanley estimates T-Mobile will add 275,000 in 1Q. 

Verizon has already disclosed that FWA adds will at least double in 1Q22 sequentially, helped in part by their aggressive $25 bundled price point, noted Morgan Stanley’s Simon Flannery. “We will be interested to hear if FWA momentum continued to accelerate through the quarter,” he wrote in an April 5 report.

Longer term, the goals of the two carriers differ dramatically. T-Mobile is gunning for 7 million to 8 million subscribers by 2025, while Verizon is hoping for a far more modest 4 million to 5 million in the same timeframe.

Of course, they aren’t the only players in this game. Starry, which just went public a couple weeks ago, is armed with its licensed mmWave spectrum, and in the words of the Cowen analysts, it’s “ready for guerilla warfare” on select rooftops in select cities, expecting 1.4 million subscribers by 2026.

Where’s AT&T?

AT&T is no stranger to FWA, either. About six years ago, it was testing a hybrid millimeter wave wireless/wireline technology to reach apartment complexes. It was also investing in Project AirGig to extend wireless internet over power lines. In 2018, AT&T talked about using unlicensed CBRS spectrum to expand its fixed wireless access network.

Going even further back, the pre-Cingular entity known as AT&T Wireless was involved in Project Angel, one of the earliest attempts to get pizza-boxed sized gear onto houses for internet services. That endeavor, which was during the Dan Hesse era (before he ended up at Sprint), never went anywhere to speak of.

These days, while AT&T offers FWA services, its public stance is much more about fiber.

The analysts at MoffettNathanson conjecture that AT&T has determined that FWA simply isn’t an attractive opportunity under most circumstances and the risk to ruining the mobile experience is simply too high. “Mobile traffic is as much as 50x more valuable than fixed traffic on a revenue per bit basis,” Moffett wrote.

Flashback: Where are FWA subs coming from?

Even though carrier executives say their FWA subs are coming from cable and fiber, the exact source of FWA subscribers remains top of mind.

That was the whole gist of MoffettNathanson’s April 12 report and the title of New Street Research’s April 10 note for investors. Analysts are doggedly trying to find out specifically where these subs are coming from.

To wit: After being skeptical about lower move activity – as in, how many households are actually moving – New Street analysts found the USPS data that tracks address changes. Moves have been below normal since the summer of 2021, they concluded, surmising that lower moves will hurt cable in markets where they overlap with DSL.

But in a footnote, Chaplin added they weren’t the only ones seeking out the USPS data. “One of our competitors found it first,” he quipped.

And there’s purely anecdotal evidence: “Several of our clients have excitedly told us that they have dumped cable for T-Mobile’s fixed wireless broadband product,” and these clients have concluded that “it’s great,” Chaplin wrote.

They even have clients that have moved their offices onto a fixed wireless connection. “We suspect that many of these clients are long T-Mobile, or short cable, or both.”