Who Will Win The US Broadband Race

Fiber, Cable, 5G Fixed Wireless, LEO Satellite

Technology evolution, market dynamics, and government actions are driving a wave of potential new entrants into the US broadband market.

5G fixed wireless access (FWA) is being deployed across major cities. Low-earth orbit (LEO) satellite is poised to bring scalable, high-speed, low-latency broadband to rural areas. Fiber-to-the-home (FTTH) continues to be the gold standard of broadband performance and, with $16 billion of Federal Communications Commission (FCC) Rural Digital Opportunity Fund (RDOF) subsidies coming online, will now be viable across a broader footprint. Cable networks, meanwhile, are converging with FTTH over time as nodes shrink. Fiber is pushed deeper into hybrid fiber-coax (HFC) networks. And new versions of Data Over Cable Service Interface Specification (DOCSIS) technology deliver improved performance with incremental investments.

Exhibit 1: Evolving broadband technical architecture

Source: Oliver Wyman analysis

We see these four technologies continuing to co-exist throughout the next decade with different competitive and geographical characteristics creating advantages or disadvantages for each. One of the critical unanswered questions is, “How good is good enough?”, whether you define “good” as high bandwidth, low latency, reliable quality of service (QoS), or by some other metric. Prior work looking at broadband demand, including in households with multiple devices and services and simultaneous usage among household members, suggests that existing use cases do not require more than 150-200 megabits per second (Mbps) of downstream bandwidth.

This accounts for multiple, simultaneous 4K video streams, cloud gaming, virtual reality, and post-COVID use cases, such as telehealth and work-from-home solutions. However, in the past, as download speeds have increased and latency has decreased, new services and use cases have been innovated to take advantage of these upgrades. The move from a text-based web to video streaming, social networking, and the ‘sharing economy’ are all examples of this. 

5G fixed wireless access is projected to deliver 500 Mbps to one gigabyte per second (Gbps) at scale. Leading LEO players have promised one Gbps. FTTH and Cable Multiple-System Operators (MSOs) will provide significantly faster speeds over time and will always be faster than wireless alternatives. If new use cases do not arise that require greater than one Gbps service, these new technologies will be competitive. 

On the other hand, wireless technologies, both satellite and 5G fixed wireless access, have advantages in the cost of coverage and installation. A single satellite can cover a large land area. Unfortunately, satellites also have limited capacity to share across this area. LEO satellite solves this problem by having smaller, lower-cost satellites that can add modular capacity, making these solutions more scalable than prior satellite technologies. The lower orbits also reduce latency, making these solutions viable for interactive use cases like voice, video conferencing, and gaming. In rural areas where the deployment of FTTH is uneconomical without government subsidy, LEO is likely to be an attractive option. 

So far, 5G fixed wireless access is primarily being deployed in urban areas, where small cell architectures and the short propagation of mmWave spectrum can be transformed into very high speeds and oceans of capacity. These solutions also can be ‘self-set up’ in a way that prior broadband solutions have never been, making it more like buying and plugging in a consumer electronics device than ordering a new major household service. This creates a much easier user experience while dramatically reducing the cost to connect and also, eventually, eliminating the need to switch service providers when moving. 

Fiber will underpin these fixed wireless access networks, however, representing 60-80 percent of the deployment costs and able to be extended into FTTH solutions in the future as new use cases develop and demand grows. Similarly, cable HFC networks will slowly morph into fiber networks – driving fiber closer to the customer with each speed and capacity upgrade and each generation of DOCSIS. 

At the end of the day, FTTH will represent the leading technology for broadband services in the US as networks converge on this foundational infrastructure.