T-Mobile and Verizon Home Internet are a new threat to cable

For years, Comcast and other cable companies have relied on a simple strategy to offset the effects of cord cutting: charge a premium price on home Internet service and enjoy skyrocketing profits on little or no of competition.

This strategy may now be in danger. Comcast’s Internet subscriber growth has been essentially stable in the last quarterwhile the Charter lost 21,000 Internet Spectrum subscribers. For both companies, this is the first time they have failed to grow their home internet business in a given quarter.

The reason isn’t a mystery, either: Across the country, T-Mobile and Verizon have rolled out inexpensive home internet service powered by their 5G networks, finally giving customers an alternative where none existed. previously. In an earnings call, Comcast CEO Brian Roberts said these carriers were the reason its broadband growth hit a wall.

It’s a rude awakening for cable companies, whose broadband monopolies in many markets have allowed them to raise prices and, in the case of Comcast, impose data caps. While Comcast and Charter have tried to downplay the threat posed by wireless home internet, experts say the competition is here to stay.

“Across the country, all kinds of Internet service providers have gained two new competitors,” says Kristen Hanich, research director for Parks Associates, referring to T-Mobile and Verizon. “They have to prepare for it accordingly.”

Home wireless internet is cheaper

T-Mobile and Verizon are cutting cable company rates. T-Mobile, for example, charges $50 per month for home Internet, with typical download speeds ranging from 33 to 182 Mbps. Verizon also charges $50 per month with download speeds ranging from 85 Mbps to 300 Mbps. according to CNETand it cuts the price in half for customers who bundle the smartphone service.

By comparison, Comcast’s nonpromotional Internet prices start at $99 per month, and Spectrum’s nonpromotional Internet service starts at $75 per month.

While wireless offerings aren’t new, both T-Mobile and Verizon have expanded into more markets, boosting speeds with midband 5G and marketing their services more aggressively. T-Mobile even released a ad for home internet service during the Super Bowl.

Subscriber growth jumped as a result. T-Mobile now has more than one million home Internet subscribers and added 560,000 in the last quarter alone. Verizon has 384,000 home wireless internet subscriberstwo-thirds of which in the last quarter.

“It puts [T-Mobile] to about the 10th largest internet service provider in the United States, coming out of virtually nothing about a year ago,” says Hanich.

Can he compete?

T-Mobile and Verizon can’t cannibalize cable Internet overnight. People typically consume a lot more data at home than when they’re on the go on their phones, and since mobile carriers send all that data over the same airwaves, they need to be more mindful of network congestion.

This means either limiting the number of new subscribers they take on, or discouraging heavy usage through data caps. To that end, T-Mobile recently launched a version of its service with data caps in markets where it is concerned about congestion. (Verizon, as of now, hasn’t capped data usage in any of its home internet markets.)

All this has led to some skepticism of analysts carriers’ growth targets. T-Mobile hopes to have between seven million and eight million home Internet subscribers by 2025, while Verizon hopes to have four to five million by then. Comcast and Charter currently have 32.2 million and 30 million Internet subscribers, respectively.

Peter Rysavy, president of telecommunications analyst firm Rysavy Research, says that even if cellphone carriers aren’t completely replacing wired Internet, they should have enough capacity to support millions of subscribers.

“The consequence is that the market will be more competitive and cable operators need to assess what the long-term implications are,” he says.

Rysavy also believes that the current version of 5G home internet is just a stepping stone. In most markets, T-Mobile and Verizon rely on low-band or mid-band 5G, but Rysavy is optimistic about the future promise of 5G millimeter wave networksthat can rival the speeds of fiber internet service.

Carriers have been slow to adopt mmWave due to its short range and limited ability to penetrate buildings, but Rysavy points to several technology improvements on the horizon that will make mmWave more viable. These include narrower radio beams that can reach more users simultaneously and wireless backhaul that will make it easier to deploy small cell sites. The result, according to Rysavy, will be even greater competitive pressure on traditional ISPs.

“Really, I see the 2020s as an arms race between these two categories of companies,” he says.

What this means for you

It is difficult to predict how this new competitive reality will affect customers.

With traditional ISPs, data has shown that when people have more choice, service improves. An analysis earlier this year by Secretariat economists, for example, found that Internet speeds increase by about 60 Mbps when a market grows from two to three providers. The Biden administration, in a decree last yearalso claimed that prices can be up to five times higher in areas where there are only one or two reliable broadband internet providers.

But Pablo Varas, associate director at the Secretariat, says the same speed increases don’t apply when wireless home internet comes to town. In reality, a study carried out by the company found that traditional cable companies have made fewer improvements to their networks in markets with wireless home Internet options.

“One potential explanation, not yet tested in the data, is that the entry of low-speed fixed wireless ISPs into a local market shifts the competitive orientation of traditional ISPs toward price and away from quality,” Varas says per E-mail.

That in itself might not be such a bad thing, though. While companies like Comcast and Spectrum are aggressively pushing expensive gigabit internet service, those speeds tend to be excessive for most users. A single Netflix 4K HDR stream, for example, consumes around 25 Mbps, which means you can stream to around 40 screens at the same time before running out of bandwidth.

The presence of cheap wireless home internet may therefore cause ISPs to rethink the low end of the market as they seek more growth, or at least remove some consumer-unfriendly policies, such as large out-of-contract price increases or data caps.

“Cable companies are known for bringing in customers and making things happen,” says Rysavy. “So maybe they’ll be motivated to have more customer-friendly contracts than in the past.”

Either way, people looking for a cheaper alternative to cable internet are finally starting to get it, which should worry companies like Comcast and Spectrum.

“A lot of people had only one choice of internet service provider, and regardless of their customer experience, that was what they needed to get if they wanted the internet,” says Hanich of Parks Associates. “And now they have a choice.”

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