Earlier this month, the FCC released its yearly Broadband Deployment Report. This was an interesting read and somewhat of an intellectually dishonest one if one peels back the onion. Starting with the headline on the link showing the report which reads: “FCC Annual Broadband Report Shows Digital Divide is Rapidly Closing.” Humm…..
Yes, we agree that the number of homes without access to at least 25 Mbps Download/3 Mbps Upload speeds declined 20% from the 2018 levels. But one has to question if this 25Mbps speed really cuts the mustard when talking about TRUE broadband. In the report it brings up the fact that some commenters “suggest we should increase our speed benchmark, given more Americans have access to faster broadband speeds.” But then it goes on to defend this definition but pointing out that: “As NCTA states, ‘even as the COVID crisis has caused an exponential increase in the use of video conferencing applications for work, school, and telehealth, it remains the case that a 25/3 connection generally is sufficient to enable such applications.”’ We beg to differ.
Evidence of this may be seen in AT&T’s recent Q4 2020 release. In the broadband division – AT&T continues to hemorrhage users where it does not have fiber connection (specifically –275,000 non-fiber subs lost in Q4) and nicely gain customers where its fiber access is available (specifically + 273,000 fiber subs gained in Q4). Customers are not stupid…speed matters and their money is following it. AT&T also gets this. Thus, it should not have come as a huge surprise – when new AT&T CEO indicated plans to build out 2MM homes with fiber in 2021. Speed and usage seem to have a direct correlation…especially in a pandemic!
Comcast and Charter’s recent Q4’20 reports validate this thesis as well. In each of the last three years – both of these operators have increased the number of high-speed internet (HSI) customers faster than they have increased the number of homes passed. Put simply – they have gain share at the hands of the less speedy telecom companies. Being a Comcast user myself – I can attest to the fact it is not price keeping me with them….it is purely the speed and throughput I and the 4 family members I share my home with are seeing. The investments Comcast has made allows Zoom, gaming, e-learning, etc. (too many to count in age of COVID) happen without a hitch. And that is worth the very high dollars we have had to pay for their service.
So back to where we started…. one has to really ask themselves even though the FCC tells us that 95.6% of American homes as of YE 2019 (Figure 1 of report) had access to “broadband” – what is the real number if one includes which almost seems like ‘table stakes’ speeds of 100 Mbps (3x the current FCC definition). PE players seem to recognize this arbitrage opportunity as evidenced by their capital pouring into some of these once thought boring RLEC players. They are all fiber focused through and through! Maybe it is time for the FCC to follow this capital trends and put out a more truthful broadband definition which captures the here and now. Because – stating the obvious – these times are indeed a changin’!