Jumpin’ on the Band (width) Wagon – Heading Toward Competition on the Information Superhighway

Jumpin’ on the Band (Width) Wagon

Heading Toward Competition on the Information Superhighway

The lack of bona fide competition in the home broadband market has been an issue for some time, but in the next few years, that will change as new technologies based on 5G wireless are deployed into the global marketplace, enabling competition.

5G is in the advanced planning stages even if LTE, the current dominant technology, will not reach 100% penetration until 2018.

From the dawn of the cable era rolling into the broadband marketplace, there was typically one provider per locale due to the enormous cost of the capital expenditures needed to wire cities.  These companies introduced the multitudes to “high speed” broadband.

Incumbent phone companies, the telcos, with legacy copper wire provided some form of competition with their DSL product, but speed was limited to approximately 6 MBPS, adequate in the early days of the internet, but not so much today with significantly higher demand, especially in households with multiple users.

Although the capabilities are there, satellite delivery of internet has not been a factor as it, too, is inordinately slow.

Ten years ago, Apple introduced the iPhone and the world changed.

The product was so popular at the outset that it put a crimp in AT&T’s network as initially they were the only carrier to offer the phone.

In due time, capacity in the AT&T network was increased, as well as those at their competitors, as more handset manufacturers introduced their smartphones in what became a very competitive market, both for the phones and carrier services.

It did not take that long in retrospect for people and households to become cell phone only.  Landlines are now a minority.  As of early this year, 50.8% of US households are cell phone only.  There is no looking back, as that will only increase even as phone form factors evolve.

People regularly tether their smartphones to their tablets and laptops through a hot spot feature.  This will be more prevalent as the new higher speed technology reaches the market, eventually circumventing the need for wired broadband.

A few years ago, Google initiated Google Fiber a super high-speed broadband and TV service that was built and marketed in select cities at great expense.  Their actions prompted several of the incumbents, such as AT&T and Comcast, to step up their game and offer higher speed connections, wanting to do so before Google entered their markets.

Other cable broadband providers followed suit, seeing the opportunity and the necessity to retain customers.  They were also observing the trend away from landlines and the VOIP services that were traditionally bundled with the broadband and video services to their subscribers.

Last year, Google decided to take a short hiatus from fiber in order to assess the situation, realizing that the wireless movement was moving forward quickly.

This lays the groundwork for a more competitive environment in broadband that will take hold in the coming years.  The seeds that are in place now include:

1. Ericsson has been showing its 5G systems at CES and other tech conferences. Although effective standards are not yet in place, the 5G systems offer the opportunity for fast speeds, higher capacity and the ability to travel “through” objects, e.g. buildings that current 4G/LGE is not able to do.
2. The FCC, using spectrum from many independent TV stations on a market by market basis, held a spectrum auction last year that raised considerable sums. Companies such as DISH, AT&T, Verizon and others bought in, knowing the spectrum was the basis for next generation wireless phone systems.
3. Verizon beat out AT&T in acquiring Straight Path Networks for $3.1B, more than doubling the AT&T bid. Straight Path holds significant patents that will be fundamental to the 5G next generation network.
4. Comcast and Charter/Spectrum announced a joint venture to offer wireless services. This will enable them to potentially transfer some of their wired customers to wireless.
5. In the past couple of years there have been numerous launches of communications satellites, in fact one was in mid-May from SpaceX for Inmarsat. Elon Musk recently announced that SpaceX will send the first of its 4,425 super-fast internet satellites into space in 2019.  These and presumably others will expand the global internet footprint considerably.

Will the new competitive marketplace resonate with the user? Yes.  Consider the following:

1. There are those who say that the younger generation/millennials is most likely to use wireless broadband only given their constant use of mobile devices, but the fact is that even “today” nearly 40% of seniors have a smartphone and 80% have cellular phones of any type.
2. One third of Americans live in households with 3 or more smartphones according to Pew Research.
3. Further, according to Pew “The vast majority of Americans – 95% – now own a cellphone of some kind. The share of Americans that own smartphones is now 77%, up from just 35% in Pew Research Center’s first survey of smartphone ownership conducted in 2011.”
4. As of the end of 2016, 12% of US adults own smartphones but do not have broadband at home, up from 8% 3 years earlier. This is bound to show continued growth and will jump considerably when the new tech is deployed.
5. Mobile carriers have become increasingly competitive and a cut-throat battle for customers, so they will continue to offer deals to attract and retain customers, constantly providing more data at lower prices.

To accomplish the foregoing and bring on the competition, several steps need to be taken.  These are:

1. Standards need to be established.
2. Handset manufacturers need to begin developing and selling 5G capable phones.
3. Carriers need to deploy the required equipment throughout their systems. It is assumed that the existing towers will accommodate the new equipment, enabling a faster deployment.
4. Consumers begin to purchase the new smartphones, although the challenge is that our phones last longer and the replacement periods are also getting longer

Lots to be done before any of the foregoing become ubiquitous.

When solid traction takes hold, it will be a better and more competitive marketplace for broadband.  Customers are ready to jump on the band (width) wagon and head to the information superhighway.