Here's what's next for T-Mobile's FWA business

With roughly 1.5 million fixed wireless customers, T-Mobile is already the nation's ninth largest Internet service provider (ISP). The company today counts more Internet customers than longtime ISPs like Windstream, TDS and Cable One, according to the latest quarterly figures from Leichtman Research Group.

Moreover, according to BroadbandNow, T-Mobile is now the nation's fifth fastest ISP with maximum speeds of 1.7 Gbit/s and median speeds of 24 Mbit/s. The company sits just behind the likes of Comcast, Verizon and AT&T.

Figure 1: (Source: T-Mobile)

According to analyst Roger Entner with Recon Analytics, both T-Mobile and Verizon enjoy the highest Net Promoter (NPS) scores among all home Internet providers in the country, wireless or wireline. Such scores are a commonly accepted rating system for customer satisfaction.

"And these numbers have increased over the last six months," Entner said, indicating that customers aren't just happy with trial services and prices but with the offering itself. "This looks like not only a happy honeymoon, but a happy marriage."

The heat that existing ISPs are feeling from T-Mobile's rapid gains is on clear display in Comcast's latest Xfinity ad:

But where can T-Mobile go from here? After all, wireless networks in general – even T-Mobile's widespread 5G network – suffer from capacity constraints born of the simple physics of cellular technology.

Targets and goals

T-Mobile has said it expects to have 7 million to 8 million fixed wireless access (FWA) customers by 2025. (Verizon ought to reach between 4 million and 5 million by that time).

T-Mobile's goal is a slight step back from the company's initial FWA hopes. Shortly after it announced its merger with Sprint in 2018, T-Mobile predicted that it would gain roughly 9.5 million FWA customers by 2024, making it the nation's fourth largest in-home ISP. T-Mobile likely refreshed that goal in part due to the extra year it took the company to obtain regulatory approval for its $26 billion Sprint merger.

In new comments to the analysts at Evercore, T-Mobile's top management team believes that they can reach their 7-8 million FWA customer goal relatively easily, with no changes to the company's existing network buildout strategy.

However, the executives hinted that T-Mobile is now looking beyond the completion of its massive 5G integration project. After that, the company could potentially deploy additional resources toward FWA in order to push past its 2025 goal of 7-8 million FWA customers.

"To expand the addressable market, management are looking at ways to improve the performance and efficiency of in-home CPE [customer premises equipment], with the potential for deploying external CPE," the Evercore analysts wrote of their recent meeting with the likes of T-Mobile's Mike Sievert and Neville Ray.

T-Mobile and Verizon have touted the simplicity of their FWA strategies. Customers can purchase a CPE receiver, get it through the mail and then plug it in near a window in order to receive FWA services. Many FWA providers use external CPE devices – often mounted on rooftops by technicians – to better connect to nearby cell towers. If T-Mobile adds external CPEs to its FWA repertoire, the move would undoubtedly improve the company's overall reach by creating better and more reliable connections between its customers' CPE and T-Mobile's cell towers.

But that's not the end of T-Mobile's FWA options.

More spectrum, more customers

"Management was more positive on the prospects for using the company's mmWave [millimeter wave] spectrum assets as a tool to deliver fixed broadband service than we had heard in the past," wrote the Evercore analysts of their recent meeting with T-Mobile's management. "They did emphasize, however, that they believe that mmWave solutions could be far more efficient and cost effective if vendors and standards were focused on point-to-multipoint fixed applications, rather than attempting to make mmWave viable for mobile applications. Management believes that efforts to make mmWave equipment capable of handling mobile applications increases the cost dramatically and makes the solutions less attractive for fixed broadband. The company isn't interested in deploying large numbers of mmWave antennas at street level, but rather is looking at solutions that would put mmWave transmitters higher up, on macro towers, with line of sight to a larger area."

Such comments are noteworthy considering Verizon positioned mobile mmWave services at the center of its initial nationwide 5G advertising strategy, despite the fact that its mmWave network covered just a tiny percentage of its customers.

T-Mobile has never put much emphasis on mmWave 5G despite having spent heavily on mmWave spectrum in the FCC's recent mmWave auctions.

If T-Mobile is looking more closely at mmWave for fixed applications, the company would likely join UScellular in doing so. After launching mmWave-based FWA services in 10 markets earlier this year, UScellular recently said it expanded the offering to fully 125,000 households across 30 cities. UScellular has boasted that it has been able to offer 1 Gbit/s services over mmWave connections at distances up to 4 miles.

But mmWave isn't the only spectrum band that T-Mobile can add to its FWA business. After setting its goal of 7-8 million FWA customers by 2025, T-Mobile acquired more spectrum across the C-band, 3.45GHz band and 2.5GHz band. This means that T-Mobile now has significantly more spectrum that it can apply to FWA than it did when it first set its FWA goals. T-Mobile is expected to begin deploying C-band and 3.45GHz spectrum into its network starting in 2023.

"T-Mobile saw an impressive 560,000 of fixed wireless net adds in 2Q22," wrote the financial analysts at Morgan Stanley in a recent note to investors. "Management noted ... that fixed wireless is a 'terrific front door' for the company in terms of driving new relationships. Management also explained that a little over half of its HSI [high speed Internet] customers are switching from cable; furthermore, about two-thirds are coming from urban/suburban markets and one-third from rural. However, the question is now how much capacity T-Mobile will look to allocate to fixed wireless."

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— Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano