AT&T's Internet Air pegged for 'healthy ramp' in 2024

According to the financial analysts at Evercore, AT&T ought to gain 75,000 total fixed wireless customers this year, and will expand that to 525,000 next year.

The analysts described it as a "healthy ramp," but cautioned that they see AT&T's fixed wireless gains as "mostly being offset by accelerated copper declines across its base."

Other analysts mostly agreed. "AT&T is clearly less committed to FWA [fixed wireless access], as it is primarily focused on FTTH [fiber to the home] and plans to use FWA as a transition technology before migrating customers to fiber," wrote the financial analysts at TD Cowen in a recent note to investors. "To that end, we don't expect a net add cadence resembling Verizon's FWA and certainly not resembling T-Mobile. The product has also not yet launched for business customers."

AT&T introduced its Internet Air-branded 5G fixed wireless access (FWA) Internet service in April and expanded it to 33 markets earlier this month.

A rising tide

Regardless, AT&T's entry into the 5G-powered FWA industry is noteworthy considering its peers Verizon and T-Mobile accounted for all of the growth in the US broadband industry during the past 12 months.

"Over the past year, fixed wireless services have accounted for 101% of the approximately 3,625,000 net broadband additions," said Bruce Leichtman, president and principal analyst for Leichtman Research Group, in a release tabulating the US broadband marketplace across cable, telecom and fixed wireless providers.

In the third quarter, Leichtman Research Group calculated that top US cable companies collectively gained 5,000 subscribers, top wireline phone companies lost about 5,000 total broadband subscribers, and fixed wireless providers (T-Mobile and Verizon) added about 940,000 subscribers.

Evercore reached a similar conclusion. They calculated that fixed wireless services in the US captured around 92% of the US broadband industry's overall growth in the third quarter.

Grabbing share

The fixed wireless impact on the US broadband industry has been clear for roughly a year now, with T-Mobile and Verizon adding hundreds of thousands of fixed Internet customers to their 5G networks each quarter.

Broadly, they've managed to grab market share from sluggish copper Internet providers, and from some cable providers, with cheap and easy-to-install offerings. The rise of FWA also comes amid a noteworthy slowdown in the number of Americans moving to a new address – an event that sometimes coincides with the purchase of a new, faster Internet connection.

The growth of FWA has had varying impacts on cable companies. "We also continue to see some impact from fixed wireless access competitors in the lower-usage and price-sensitive customer segments of our residential and SMB [small- and medium-sized] businesses," said Charter Communications' CFO, Jessica Fischer, during the cable company's recent quarterly conference call, according to Seeking Alpha.

Charter isn't alone. "We are seeing fixed wireless begin to more aggressively compete for our customers at the lower speed tiers across several of our legacy markets," acknowledged WideOpenWest (WOW) CEO Teresa Elder during the cable company's quarterly conference call, according to Seeking Alpha. That news helped send WOW's stock tumbling.

But Elder echoed sentiments from several other cable industry executives: "We also believe that many of these [fixed wireless] customers who left will return to WOW due to the reliability and value of our high-speed data service."

Indeed, officials from T-Mobile and Verizon have said that they may need to engage in new strategies – whether deploying additional spectrum, external antennas, cell splits or some other technique – as their networks begin to fill up with FWA customers.

Already T-Mobile is embarking on a fiber-selling strategy across 11 different markets with partners including Tillman FiberCo, SiFi Networks and Intrepid Networks.

AT&T's latest FWA tactic

During AT&T's latest quarterly conference call, CEO John Stankey described the company's Internet Air service as a "tool in our connectivity toolbox" that will "primarily act as a targeted [copper] catch product."

According to the financial analysts at New Street Research, AT&T could shutter its copper Internet service at up to 30 million locations, but it's not clear how many of those locations would be offered fiber or fixed wireless alternatives. The analysts also noted that it's unknown how regulators, including those at the FCC, might react to AT&T's effort to discontinue its copper-based Internet services at that many locations.

"The current FCC has not yet indicated its view on whether, and if so with what parameters, the FCC does regard Air as an adequate substitute," they wrote in a report this week.

To be clear, this isn't AT&T's first foray into FWA. The company introduced a fixed wireless product on its 4G network using 3.5GHz CBRS spectrum in 2019, in part to meet Connect America Fund Phase II buildout requirements. According to Fierce Wireless, the company counted around 500,000 FWA customers on that network last year.

Now though, AT&T is leveraging its C-band and 3.45GHz midband spectrum and 5G network technology to offer a faster fixed wireless service. According to an AT&T website, its 5G FWA offering provides download speeds of 40-140 Mbit/s, while its 4G service offers download speeds of 10 Mbit/s.

Reading the tea leaves

AT&T is offering its new Internet Air product in locations where it operates copper infrastructure, fiber infrastructure and also where it has no existing wireline broadband offerings.

In the third quarter, AT&T added 297,000 additional fiber customers, but lost 281,000 non-fiber customers. Thus, AT&T would have posted an overall loss of broadband customers were it not for the 25,000 fixed wireless customers it added to its third quarter haul.

It's not clear how that customer mix might evolve as AT&T's network strategy matures. The company is building fiber to millions of new locations, and is still in the early stages of its midband 5G network buildout. It's also hoping to shutter its copper network due to the expenses involved in maintaining it.

"We question if FWA can sustainably be the bridge to broadband growth with DSL [copper] losses, though it was enough this quarter to turn subscriber additions positive," wrote the financial analysts at KeyBanc Capital Markets in a recent note to investors following AT&T's third quarter earnings report.