Marek’s Take: Has fixed wireless finally found its success story?

Marek's take

Wireless internet service providers (WISPs) have long offered fixed wireless broadband services in rural areas where cable or wireline broadband is lacking. But now fixed wireless is seeing a bit of a revival in some urban markets thanks to Verizon’s 5G Home service and newcomer Starry’s fixed wireless 802.11-based service.

Verizon just added its sixth 5G Home market in Detroit. The service is also available in Chicago, Indianapolis, Los Angeles, Sacramento and Houston. 5G Home uses the 5G New Radio standard and is deployed in Verizon’s millimeter wave (mmWave) spectrum.

Starry also offers a fixed wireless service that uses mmWave spectrum but it is based upon 802.11 technology. The company sells its service in Boston, Los Angeles, New York City, Denver and Washington, D.C. Starry recently told financial analyst firm MoffettNathanson that it will launch service soon in Reno and Las Vegas, Nevada.

Beyond using mmWave spectrum, the two services are fairly different. Starry focuses on providing service to multi-dwelling units and apartments. The company provides symmetrical 200 Mbps service for $50 per month.

Starry executives also told MoffettNathanson that it expects its customer base to grow by about 10% per month and analyst Craig Moffett said he thinks the company will have about 100,000 or more customers by year-end.

Verizon initially launched its first five 5G Home markets back in late 2018 using a proprietary standard that it had created while it was waiting for the 5G New Radio standard to be finalized. The company is now moving away from that proprietary implementation (Indianapolis and Los Angeles are being upgraded). And the company has a new self-stall option that makes it more cost effectively to deploy. Verizon has said it plans to have 10 5G Home markets by year-end.

Verizon charges $50 per month for existing Verizon mobile customers that want the 5G Home service. For non-customers, it charges $70 per month. Although it says uptake is strong for the service, the company has not revealed any subscriber numbers.

One way Verizon is trying to create stickiness for customers is to bundle its 5G Home with other services. Customers get Disney+ content and YouTube TV. In addition, the router comes with Amazon Alexa Built-in so they can control smart home devices and it is also offering access to Google Stadia’s cloud gaming service for three months for free.

Verizon and Starry aren’t the only companies offering fixed wireless broadband in urban settings, but they are the most visible. AT&T’s Igal Elbaz, SVP of wireless technology and experience, recently told investors at a Cowen & Company conference that AT&T has trialed fixed wireless broadband and knows that it works but is not clear about the economics of it. In particular, he said that they need self-install customer premises equipment to make the economics better. “We will offer it when it makes sense,” Elbaz said.

And T-Mobile promised to offer in-home fixed wireless services to about 9.5 million U.S. households by 2024, or about 13% of the country, if its transaction with Sprint was approved. That deal is now final but T-Mobile hasn’t said much about its fixed wireless aspirations lately.  And Dave Mayo, the T-Mobile executive who was in charge of the company’s fixed wireless business, has left the company and joined Dish Network as EVP of network development.   

Will fixed wireless thrive?

But not everyone is convinced that these new attempts at delivering fixed wireless broadband will be a success. According to Lynnette Luna, principal analyst with GlobalData, Verizon needs to provide some clarity on its strategy. “They don’t want to deploy it in places with a lot of broadband competition so they look for markets where they have an advantage but I don’t understand their formula,” she said. However, she added that she thinks it’s smart for Verizon to bundle the service with other things. In particular, she likes that Verizon currently is offering access to Google Stadia for free for a few months because it showcases one of 5G’s key use cases — cloud gaming.

Luna also believes because Starry is focusing just on multi-dwelling units, its market is very niche. “They have demonstrated that it can be a business but it’s not competitive with Comcast.”

Roger Entner, founder of Recon Analytics, is also skeptical about Starry. “100,000 customers by year-end is a sad statement,” he said. “They should be getting multiples of that every quarter.”

Entner added that fixed wireless is a business that requires economies of scale to work. “Connectivity is a high fixed cost,” he said. “You need scale and they aren’t getting to scale.”

However, he’s less skeptical about Verizon because he believes that Verizon doesn’t have to do a lot of incremental build to provide the fixed wireless service because it’s also deploying a 5G mobile service.

Nevertheless, he still thinks fixed wireless has the greatest chance of success in rural markets with underserved customers. “25% of households in the U.S. still do not have broadband,” he said. “A mile of fiber costs between $20,000 and $30,000 to deploy. If you can save a mile of fiber and do fixed wireless instead, that makes more sense.”

Although fixed wireless is currently experiencing a bit of a resurgence, it appears that providers still haven’t found the perfect business model for the technology.