January 19, 2023
Fixed wireless access (FWA) providers are still capturing broadband subscriber share, but the sector's growth curve is "beginning to bend," ISI Evercore found in its analysis of the broadband industry ahead of the coming wave of Q4 2022 financial results.
ISI Evercore expects US wireless providers – primarily Verizon and T-Mobile – to add about 640,000 residential FWA subs in Q4, nabbing the bulk of broadband industry net adds for a third straight quarter. Highlighting a potential leveling out, a gain of 640,000 residential FWA subs would mark a sequential slowdown of -30,000 net adds if the forecast holds up.
Figure 1: Residential FWA net adds (000s), 2021-23E Click here for a larger version of this image.
(Source: Company data, Evercore ISI Research)
That slight quarter-over-quarter decline indicates that FWA's "adoption curve is shifting from accelerating to linear," the analysts noted.
But the analysts also estimate that FWA captured the bulk of 2022 residential broadband subscriber growth, tacking on nearly 2.3 million subs and boosting FWA's share of the home broadband market by 200 basis points, to 3.8%. FWA's share gains, they added, were "essentially evenly split between cable and telco."
Slowing overall broadband sub growth continues
For the bigger broadband picture, ISI Evercore is forecasting Q4 2022 net adds of 440,000, down -75,000 sequentially and down roughly -100,000 from the year-ago quarter. The analysts also estimate total broadband penetration of US households to reach 79.9%, up 50 basis points year-over-year.
Meanwhile, fiber-to-the-premises (FTTP) builds are expected to perk up a little, with just below 1.3 million incremental fiber homes built in the quarter, up about 150,000 sequentially and +300,000 year-over-year.
Figure 2: US FTTP sub net adds (000s) Click here for a larger version of this image.
(Source: Company data, Evercore ISI research)
ISI Evercore expects telcos to add 500,000 fiber broadband subs in Q4, up about 100,000 from year-ago totals. Factoring in a loss of 600,000 copper-based broadband subs, the total residential telco wireline sector is expected to drop 100,000 subs in Q4.
More rough seas for pay-TV
Traditional pay-TV is expected to take another hit, as the analysts see the sector shedding another 1.8 million subs, widening from a year-ago loss of 1.4 million. That will leave traditional pay-TV with a base of 62.9 million subs, or less than 49% of US households.
Virtual multichannel video programming distributors (vMVPDs), such as YouTube TV, Sling TV, DirecTV Stream, Philo and FuboTV, will take up a bit of the slack. ISI Evercore forecasts that group to tack on 660,000 subs in Q4, in line with year-ago additions.
With vMVPDs included, the analysts estimate the total pay-TV sub base to contract by about 1.2 million subs in Q4, ending the period with 77.5 million subs, or -7.4% from year-ago levels.
Here's a snapshot of select Q4 results Evercore ISI expects from select individual companies:
Altice USA is expected to shed 30,000 broadband and 35,000 residential customers, improving a bit from the prior quarter. The operator is also expected to add about 250,000 homes to its FTTP footprint.
AT&T is expected to lose 25,000 consumer broadband subs – a gain of 340,00 fiber subs offset by a loss of 365,000 DSL/copper subs.
Charter Communications is anticipated to add more than 40,000 residential broadband subs, benefiting in part to the company's new Spectrum One service bundle. Charter is also expected to add 450,000 mobile lines in Q4, up 50,000 sequentially.
Comcast is expected to lose 50,000 residential broadband subs, and to lose about 550,000 video subs. Mobile will be a bright spot, as Comcast is expected to add about 325,000 lines.
Verizon is expected to add 245,000 consumer FWA subs, and 350,000 across the board, ending the year with 1.14 million. Consumer wireline broadband is expected to add 30,000 – a gain of 60,000 subs from Fios alongside a loss of 30,000 DSL subs.
— Jeff Baumgartner, Senior Editor, Light Reading
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