Broadband internet service in the U.S. has been plagued by uncompetitive practices. Large, nationwide internet service providers (ISPs) have built monopolies that prohibit innovation, drive down levels of service, and block competitors from entering the market. In their 2016 Broadband Progress Report, the Federal Communications Commission (FCC) found that only 38% of Americans have more than one choice of broadband provider, and only 10% of Americans have access to broadband speeds of up to 25 Mbps downlink/3 Mbps uplink. Many Americans lack access to broadband internet entirely, especially in rural areas: 39% of rural Americans, 4% of urban Americans, and 41% of Americans living on Tribal lands do not have access to broadband services. In light of these factors, the FCC concluded that “advanced telecommunications capability is not being deployed to all Americans in a reasonable and timely fashion.”
Compounding this issue is the ever-increasing consumer demand for broadband access. Online media continues to grow in popularity, and as a result many wireline and cable service providers are experiencing customer churn. In the first quarter of 2017, 612,000 Americans cancelled their pay-TV subscriptions (referred to as “cutting the cord”), and an additional 10.8 million pay-TV subscribers are predicted to cut the cord by 2021. As pay-TV gives way to online subscription services, the need for fast and reliable broadband internet is being brought into sharp focus.
Some organizations have attempted to provide a better broadband option to consumers, through the deployment of fiber-optic networks. For example, Google Fiber, announced in 2010, offers fiber-to-the-home (FTTH) high-speed broadband internet with downlink speeds of up to 1 Gbps. Verizon Fios is another FTTH fiber solution that offers high speed broadband, up to a “Fios Gigabit Connection” of 940 Mbps down/880 Mbps up. Such networks serve to raise consumer expectations of broadband internet, pressuring ISPs to improve service. However, deploying fiber networks is a slow and expensive process, with an installation cost estimated to be approximately $1000 per home. Accordingly, despite the high speeds available with fiber, time and cost expenses prohibit fiber as a practical broadband remedy.
Therefore, to overcome the problems of anti-competitive ISPs and increasing demand for high speed broadband services, a new solution is required. A promising option is to adopt millimeter wave (mmWave) technology, which covers the spectrum from 30 – 300 GHz, to deploy fixed broadband wireless solutions. In 2015, to prepare for future Fifth Generation (5G) mobile services, the FCC proposed licensing for spectrum bands in the mmWave range, including 27.5 – 28.35 GHz, 37 – 38.6 GHz, 38.6 – 40 GHz, 57 – 64 GHz, and 64 – 71 GHz. Though mmWave bands show potential for future broadband services, many of them suffer from the existing problem of ISP monopolies. With recent multi-billion dollar acquisitions of smaller providers, large ISPs like AT&T and Verizon have already begun dominating ownership of mmWave bands. Together, these two companies own over 50% of available licensed mmWave spectrum in the U.S.
However, service providers that can’t afford the cost of licensed mmWave bands have another option: the use of unlicensed mmWave bands, such as the 60 GHz V-Band. With 14 GHz of contiguous spectrum available, and commercial chipsets and products already developed for this band, providers can deploy gigabit-to-the-home (GTTH), fixed wireless access (FWA) for nothing more than a minimal cost of infrastructure. Thus, the unlicensed 60 GHz V-Band offers service providers an excellent opportunity to offer competitive gigabit services.
We will soon be publishing a white paper on behalf of a client on 5G Fixed Wireless Gigabit Services Today- An Industry Overview, stay tuned!
Wi-Fi 360 provides market research and content marketing services (such as this blog)for the Wi-Fi and wireless industry. If you are interested in sponsoring a piece of research, white paper, webinar or need a more comprehensive content marketing plan, do not hesitate to contact us!
By Peter White, principal analyst, media and content
Raising a pile of cash from a massive sell-off can take a company in one of two directions, either financing consolidation and expansion, or being acquired itself. Vodafone became one of the biggest ever examples of this phenomenon after selling its stake in Verizon Wireless for $130bn, arming itself with oodles of cash but also in the process halving its market capitalization to around $100bn.
This brought it within the compass of a few big telcos with expansionist plans, notably AT&T, capitalized at $170bn. However, nobody else seems in the running at present, with Verizon itself concentrating more on increasingly intense domestic competition in the wake of Comcast’s $45bn proposed acquisition of Time Warner Cable. This leaves AT&T as the only realistic contender given the noises it has been making lately about European expansion, although the window of opportunity in this case is closing fast.
Vodafone’s $10bn acquisition of Ono makes the company that much harder to swallow, so we can largely forget the idea of Vodafone being acquired and instead plot its course to expand across Europe as a multiplay operator, having decided to concentrate its resources at that level for now.
Firstly it is worth considering that the price paid for Ono does represent value for money. It was just under 10.5 times its EBITDA earnings, less than the 11.3 ratio for Ziggo agreed by Liberty Global or the 12.4 Vodafone itself paid for Kabel Deutschland recently. Of course these differences reflect a range of factors such as prospects for growth in a given market, but then Vodafone can point out that when its proposed $4bn cost savings within Ono are taken into account, EBITDA would be only 7.5. Vodafone was acutely aware of the risk of overpaying given that Ono had been contemplating an IPO, partly with a view to maximizing the price. We do not think it achieved this, and as Spain’s largest MSO with around 1.4 million broadband subscribers, Ono strengthens Vodafone’s position there, dovetailing with its FTTH roll out programme through its joint $1.3bn program with Orange in Spain to reach 6m homes by 2017.
Vodafone became the force it is purely as a mobile operator, which went well while that sector was enjoying seemingly exponential and everlasting growth over a 20-year period, but hit the buffers as it became clear that future converged media and communications, call it quad play, would actually revolve around broadband. For Vodafone this has meant a headlong rush into fixed line assets, selling its stake in Verizon Wireless and now aiming to establish itself as one of Europe’s big converged players, which it will surely succeed in doing.
The question will be who will line up beside Vodafone after the inevitable consolidations and mergers over the next two years. Content strategy has a role to play here, with Vodafone setting its stall out like Liberty Global as an aggregator ready to deal with whichever broadcasters and rights holders are willing to provide the premium material in each given market.
In the UK Vodafone already has a large fiber network following its $1.6bn acquisition of the Cable & Wireless UK business in 2012. Although this was largely focused on the enterprise sector, it did bring substantial broadband infrastructure, which would overlap with BT’s in the event of a merger. So perhaps BSkyB might be a target, being smaller with a capitalization around $24m and remembering that it is only minority owned by 21st Century Fox with 39.14%.
Furthermore Vodafone and BSkyB have been ganging up against BT as a common enemy and by merging they would present a formidable force, despite nearly all of Vodafone’s backhaul coming from BT. BSkyB may feel it is in danger of losing the broadband battle against BT on its own, so such a move could be recommended to shareholders. For Vodafone it would mean becoming the UK’s dominant converged player, number one in pay TV with 11m subs and in number two or three spot for both mobile and fixed broadband, depending on which data we look at.
Vodafone’s other target market is Italy, where it has just under a third of the mobile market a whisker behind Telecom Italia, still the clear leader at just over 50%, although that has been falling. Vodafone’s Italian job may come next, but any UK move will be the one that will show whether it is able to flex the muscle to get right to the top of Europe’s converged communications market.