Officials from Lumen Technologies expressed little interest in adding a wireless component to the company's fiber offering.
"Right now, we don't see the consumer demand for that bundle," said Maxine Moreau, the executive in charge of selling Lumen's fiber network to consumers and businesses. Moreau was responding to a question about bundling during a recent investor event, according to a Seeking Alpha transcript.
"We think the value of our fiber broadband capability stands on its own. We'll continue to evaluate our customer needs. And if the need arises, we'll explore wireless partnerships if it makes sense. But right now we don't see the customer demand for it," she explained.
Figure 1: Maxine Moreau.
(Source: Lumen)
The comments are noteworthy considering the dramatic rise of service bundling and network convergence in the US. Some of the biggest telecom companies in the country – T-Mobile, Verizon, Charter Communications and Comcast – have been driving the topic.
Specifically, Verizon and T-Mobile have been pairing their mobile offerings with their new, discounted in-home broadband services. Meanwhile, Comcast and Charter have been offering their new, inexpensive mobile services matched with their own in-home broadband offerings. The result has been heated competition between the wireless and cable industries.
"Both the wireless operators and the cable companies can claim marginal cost advantages in their cross-over offerings; fixed wireless access can be offered for almost no incremental cost at all, and cable wireless service benefits from traffic offload that can dramatically lower marginal costs there, as well," wrote the financial analysts at MoffettNathanson in a recent report on bundling and convergence. "But FWA [fixed wireless access] suffers from capacity constraints, while Cable wireless does not (and TelCo fiber doesn't enjoy a marginal cost benefit from being paired with wireless). Cable is further advantaged by footprint; its ability to deliver a converged offering is ubiquitous, while the TelCos' is actually quite limited."
Exploring the opportunity
Lumen isn't the only provider eyeing the bundling situation. "Right now, we don't have a mobile offering. However, we are constantly evaluating the complementary products and services that would best meet the needs of our customers," wrote a Brightspeed representative in February, in response to questions from Light Reading. Brightspeed is the fiber provider stemming from Lumen's $7.5 billion deal with Apollo in 2021.
Already a number of wireless providers have been cheering the combination of fiber and 5G. AT&T, for example, has said that its fiber customers are more likely to subscribe to its wireless offerings. And both AT&T and Verizon offer customers noteworthy discounts if they buy paired fiber and 5G services. Both AT&T and Verizon own fiber and 5G networks.
Similarly, T-Mobile has been toying with the concept of offering 5G alongside fiber – though T-Mobile does not own a fiber network. The company last year quietly introduced T-Mobile Fiber in parts of New York City. But T-Mobile doesn't appear to be offering any fiber/5G bundling discounts.
"So far, we haven't seen a benefit to convergence that really translates into consumer value beyond just a discount. There are plenty of ways to deliver customers discounts," explained T-Mobile CEO Mike Sievert during his company's recent earnings call. He said T-Mobile is partnering with unnamed fiber network operators to offer T-Mobile-branded fiber. "We'd be interested in it if it's something where we could add value and make the market better for customers and make some money doing it."
The financial analysts at MoffettNathanson explained that most 5G and fiber pairings don't make much economic sense: "The marginal costs of pairing fiber with wireless do not improve the cost structure of either service, so while churn may be improved by virtue of getting the customer into a bundle, margins are reduced," they explained. "Net returns on new fiber deployment are hurt rather than helped."
To be clear, Lumen is one of the nation's biggest fiber network operators. According to Leichtman Research Group, the company is the nation's third-biggest wireline phone provider with just over 3 million customers – but unlike AT&T and Verizon, Lumen doesn't own a wireless network.
Lumen is also one of the many US fiber providers looking to expand its fiber footprint over the coming years. However, Lumen and several other fiber operators recently dialed down their fiber expansion ambitions amid rising inflation and sluggish home sales. Broadly, the financial analysts at Evercore recently noted that US fiber providers had planned to collectively build 9.4 million new locations during 2023, but now they expect that number to be around 6.5 million.
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— Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano