Four questions dogging T-Mobile's 5G fixed wireless ambitions

T-Mobile on Wednesday officially took the wraps off its 5G-powered fixed wireless Internet service, dubbed T-Mobile Home Internet.

The offering costs $60 per month, promises download speeds around 100Mbit/s and does not cap customers' monthly usage. The company said it is now offering the service across 30 million households. A third of those locations are in rural areas, and the rest are in suburban and urban areas. The company's target area represents around 24% of all US households.

T-Mobile has said it expects to count around 500,000 fixed wireless customers by the end of this year. Within the next five years, T-Mobile said it expects to gain between 7 million and 8 million fixed wireless Internet customers. That figure is slightly below the estimates T-Mobile provided in 2018, when it said it would gain 9.5 million customers within that rough time frame. The figures position T-Mobile far behind the likes of Comcast (roughly 30 million home broadband customers today), Charter (28 million) and AT&T (15 million).

T-Mobile first outlined its ambitions for fixed wireless services in 2018 as part of its proposed merger with Sprint. It then launched several pilot efforts starting in 2019. And Light Reading reported earlier this year that T-Mobile had begun to seed its existing fixed wireless customer base with 5G-capable equipment.

However, there remain a few outstanding questions about T-Mobile efforts to sell in-home Internet services in addition to mobile connections.

1. Can the network handle it?

With 100,000 customers around the country already using fixed wireless Internet services on T-Mobile's LTE network, the operator clearly has some idea of how much data customers will be using.

Indeed, T-Mobile's Dow Draper told PCMag that the operator expects customers to use "several hundreds to the high hundreds of gigabytes" of data per month. During T-Mobile's analyst event last month, he said that 20% of T-Mobile's pilot users were consuming more than 500GB per month.

However, some new figures indicate that in-home broadband usage is set to explode amid demands for streaming video, video conferencing and other high-bandwidth applications. For example, a new study from OpenVault shows that the number of "power users" – those who consume at least 1 terabyte of data per month – has almost doubled. Separately, AT&T said it anticipates mid-level home Internet users to consume fully 1.5TB per month by 2025.

As a result, T-Mobile will "only sell capacity to fixed broadband subs in markets where they have more than their mobile subs could possibly use," according to the financial analysts at New Street Research. "We estimate they could only support 4.1 million average fixed broadband subs in markets where they have excess capacity."

Perhaps more worrisome are growing demands for uplink capacity. AT&T forecast that the ratio of downlink traffic to uplink traffic is moving from 10:1 today to about 5:1 by 2025. Such developments could put a strain on wireless networks specifically considering they are often geared to ensure speedy download connections at the expense of upload capacity.

Such factors have led some – including Tom Wheeler, the former chairman of the FCC and a former chief executive for CTIA, the wireless industry's main trade association – to turn away from the allure of fixed wireless services. "Even the major wireless carriers that invested heavily in FCC-run auctions of millimeter wave spectrum as a high-speed delivery pathway have cut back both their expectations and promises for widespread, point-to-multipoint wireless delivery at gigabit speeds," he wrote in recent Congressional testimony. "Wireless may be a last resort option in the most isolated areas, but it should not be a first resort for most of America."

T-Mobile's Dow Draper told PCMag the operator will take subscribers on a first-come, first-served basis until its network capacity runs out, and then will add subscribers as it adds capacity.

2. Will anyone want it?

"A quarter of all households don't have access to ANY high-speed broadband," T-Mobile wrote in a release. "And nearly 40% of households that do have access live in areas with only one provider, which means no competition."

CNET's Rick Broida reported that he has been using the pilot version of T-Mobile's Home Internet. He said he has experienced some hiccups, but it's "a lot more tolerable when you're paying less than half what you were before."

"There won't be demand for the service in fiber and upgraded cable markets where the service is no better and the price is not meaningfully lower," argued the New Street analysts. "We would guess 80% of households in those markets prioritize speed and reliability over price. That 80% won't choose a 100Mbit/s wireless service over a fixed connection. The other 20% won't be interested at $60/month."

Overall, though, the analysts at New Street estimated that T-Mobile could enjoy up to 70% penetration among the customers it's targeting.

3. Can T-Mobile meet demand?

Assuming T-Mobile does find willing customers, the operator faces another problem: getting enough chips to supply demand.

"We know there will be a little more demand initially than we can serve," T-Mobile CEO Mike Sievert explained during the operator's launch event. "Thanks for your excitement and your patience."

T-Mobile's Draper told PCMag that the global chipset shortage has limited T-Mobile's supply of 5G modems.

That's not surprising considering the shortage has affected technology industries ranging from automotive to video games. In telecom, optical networking company Infinera said the situation could cost it up to $10 million over the next three months. And Gogo announced it will delay the launch of its planned 5G network from this year to 2022 due to the shortage.

4. Is it a good idea?

"T-Mobile makes ~40x the revenue per GB from mobile subs that they would from fixed broadband subs," wrote the financial analysts at New Street. That's not necessarily a surprise considering the average smartphone customer consumes just 12GB of data per month, according to Ericsson.

"We like T-Mobile stock for the far bigger opportunity we see in mobile," they noted.

Related posts:

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