T-Mobile US continues to see explosive growth of data traversing its 5G-powered fixed-wireless access (FWA) service, which echoes new analyst data, but the carrier is not concerned over its ability to continuing serving that growth with its current spectrum and technology position.
T-Mobile US’ COO Srini Gopalan told investors during the carrier’s third-quarter earnings call that its 5G-based FWA service gained 506,000 net new connections during the quarter, which was a 22% increase compared to the same quarter last year. The carrier ended Q3 with 8 million total FWA connections.
More significantly, Gopalan said that those FWA customers were consuming an average of 580 gigabytes (GB) per month of data through that service. That’s a significant increase from the approximately 450 GB of month they were averaging two years ago, further highlighting ongoing investor concerns over the ability for operators to maintain network quality in the face of surging FWA demand.
T-Mobile US’ management downplayed concern, touting their continued focus on supporting that service using fallow capacity on its network that it continues to bolster with new technology updates and new spectrum assets. Those technology updates include its recently deployed Low Latency, Low Loss, Scalable Throughput (L4S) that runs on the carrier’s 5G-Advanced and 5G standalone (SA) core, with recent spectrum support coming from its acquisition of UScellular and secondary market license purchases.
“What I love about FWA is the heart of it is the fallow-capacity model, and what we’re benefiting from is the ultra-capacity network, but also the rapid evolution you’re seeing in mobile technology, which is moving far quicker than a lot of other technologies, which is giving us more and more runway and also making the product incredibly sustainable,” Gopalan said, pointing to how T-Mobile US refers to broad spectrum support it provides for its network.
The spectrum game is on
The industry’s secondary spectrum market has come to the fore following long-time spectrum holder EchoStar’s recent move to unload most of its vast trove of diverse spectrum licenses. The biggest tranche of those licenses went to AT&T in a $23 billion deal that even AT&T CEO John Stankey admitted was a lot, with a smaller tranche going to SpaceX for $17 billion.
EchoStar continues to sit on a portfolio of spectrum licenses, mostly in the 700 MHz, AWS-3, and Consumer Broadband Radio Services (CBRS) bands. Published reports have linked Verizon as a potential buyer of those AWS-3 assets. However, T-Mobile US has so far not been included in any significant way.
T-Mobile US’ outgoing CEO Mike Sievert told investors during the latest earnings call that the carrier has managed to deftly maneuver around this spectrum issue by buying spectrum when there is a glut of capacity in the market.
Most of T-Mobile US’ current spectrum load came from its $26 billion acquisition of Sprint, which included a deep pool of 2.5 GHz spectrum that is the capacity champ of the carrier’s 5G network. That deal came together under the previous President Donald Trump administration, with the approval somewhat pre-ordained as the then dominant market positions by Verizon and AT&T left T-Mobile US as the only agreeable operator able to acquire the beleaguered Sprint network.
That deal also allowed T-Mobile US to limit its need to participate in the FCC’s auction of mid-band spectrum in 2021, which Verizon and AT&T spent nearly $79 billion combined in purchasing licenses. T-Mobile. US, on the other hand, spent a relatively paltry $9.3 billion during that auction.
Sievert pointed to those advantageous moves and concerns over the lack of new spectrum for the market, which was tied to political wrangling that removed the Federal Communications Commission’s (FCC) ability to hold spectrum auctions – an issue that was just recently resolved, as reasons for the recent spectrum license intrigue.
“Spectrum prices, as always, will be a function of supply and demand,” Sievert said. “We see a lot of supply coming. Prices right now in the market are a function of low supply and a function of a once in a generation sort of existential threat faced by our benchmark competitors at the time of the C-Band auction … that pushed prices to unprecedented levels. And that’s where they stay. That will probably change over time. That’s our bet. … The difference between us and others is that they might be in a business place where they need to act right now at these elevated prices, where we have the ability to be patient and pick our moments on spectrum. As we see those moments come … we will not just defend but extend our lead over time, and certainly … entering those with a strong balance sheets is an element of it.”
T-Mobile US’ approach comes as analyst firms predict continued FWA-based consumption growth.
ABI Research recently forecast that the worldwide FWA customer base will hit 233 million connections by 2030, with 5G technology accounting for 81% of those connections. That growing base is expected to push consumption at a nearly 19% compound annual growth rate (CAGR), hitting 1 zettabyte of data consumed by the beginning of the next decade.
5G and fiber to target broadband
Gopalan, who is set to replace long-time CEO Mike Sievert on November 1, perhaps tipped his leadership plans by stating the carrier will continue to drive 5G FWA adoption alongside its growing focus on fiber-based broadband.
“We’re really excited by the broadband opportunity. This plays to the heart of the un-carrier,” Gopalan said, referencing T-Mobile US’ legacy pitch as a carrier willing to shake up the market. “What we’ve got here is customers in a place where they have an inferior product, quite often, where they’re paying a huge premium. It’s classic un-carrier territory: going in and attacking incumbents who have not invested in their networks and who are charging a large premium for a product that isn’t living up to expectations. Now we’ll go after that with both FWA as well with as well as fiber. We see those as complementary, and the way we think about both those businesses is setting them up in a way that the economics allow us to pursue.”
Gopalan’s plan differs from that of AT&T CEO John Stankey, who continues to view 5G-based FWA services as a second-class citizen to fiber.
Verizon, which is set to report earnings next week, has taken a broadband approach similar to T-Mobile US that focuses on both wireless and a bolstered fiber model. However, Verizon recently ditched long-time CEO Hans Vestberg who championed that approach and welcomed in former PayPal CEO Dan Schulman as its new leader, which could lead to a strategy change.
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