Key messages

• Moves by mobile operators in the U.S. to offer fixed-wireless home broadband services are further blurring the lines between fixed and mobile networks. Cable operators in the U.S. are responding to this competitive challenge by driving the U.S. market further towards convergence, in the form of fixed-mobile bundling. This trend is driving greater competition in the market, lower prices, and more choice for consumers.
• Speedtest Intelligence® data shows opportunities for cable companies and the big-three national operators to leverage positions of strength in one access technology to cross-sell to consumers and drive adoption of bundled services.
• U.S. operators should look to European operators’ experiences with service bundling, where they have been shown to reduce churn and offer ARPU uplift opportunities, but require operators shift from a focus purely on price, to driving improvements in the consumer experience.
• Fixed and mobile networks are already being used in tandem. For example in the U.K. BT includes a SIM within its Halo routers to offer redundancy to its fixed broadband customers. And already in the U.S. Comcast utilizes its XFINITY Wi-Fi hotspot network to provide high capacity coverage for its customers, allowing it to improve network performance in areas where 5G signal typically struggles to penetrate, while also offloading mobile traffic to its fixed network.
• Looking to the future, we anticipate more strategic moves to drive improved consumer experiences as the convergence of fixed and mobile networks continues. The emerging set of Wireless Wireline Convergence (WWC) standards being developed by 3GPP and the BBF offer up some unique capabilities, but as ever, vendor and operator support will be key.

Blurring the lines between fixed and mobile networks

Fixed and mobile networks are becoming increasingly complementary, extending the reach of internet connectivity, performance, and reliability. Fixed networks support wireless devices through Wi-Fi offload in the home and via public and operator Wi-Fi access points, often in locations where cellular signals face propagation challenges. Additionally, wireless networks can provide cellular redundancy to fixed broadband services, often via a SIM added to the router.

Cable companies have offered mobile services for some time now via MVNO agreements, (Cox is set to be the latest example), and are able to utilize their Wi-Fi hotspot networks to offer greater coverage and capacity to subscribers. Ookla® data indicates that for markets such as the U.S. that have widespread fixed broadband penetration, mobile users spend approximately 75% of time on average connected to Wi-Fi networks, as opposed to wireless networks. This number ranged from a low of 67.5% for T-Mobile, to a high of 80.0% for cable operator Comcast’s XFINITY. This helped XFINITY and Spectrum rank as fastest overall mobile service across their respective service areas when considering 5G and Wi-Fi access combined.

On the flip side of the coin, the growth in fixed-wireless access (FWA), particularly via higher-speed 5G spectrum, offers an alternative to existing fixed networks. In the U.S., fixed wireless is already being used to cover locations that would  be too costly to lay fiber to reach, and is also being offered as a competitive alternative to existing fixed networks. Both Verizon and T-Mobile have championed this approach, and are seeing strong growth in their respective fixed-wireless customer bases, although fixed wireless still represents a small proportion of overall fixed broadband subscribers.

Fixed and wireless technologies also play an important role in today’s backhaul networks, with fiber instrumental in extending the reach and capacity of mobile networks, and microwave point-to-point wireless connections still common in many parts of the world for backhaul. Throw satellite connectivity into the mix via the growth of LEO constellations, and it’s clear that there’s no one-size-fits-all solution for providing universal connectivity — a blend of technologies is required.

Fixed-mobile bundling — initially focused on cost savings for consumers

The growth of fixed-mobile (convergent) bundles in the U.S. is occurring amidst a slowing of the global economy, with inflation running into double digits in many markets, pushing them towards a possible recession. This could well spur the adoption of fixed-mobile bundles in the U.S., paralleling the experience of many European markets during the last prolonged economic downturn which began in 2008. In this economic environment, a number of European operators introduced convergent bundles, offering them at an overall discount to the discrete underlying services.

While not prevalent in all European markets, fixed-mobile bundles have taken hold in many key markets, championed by regional powerhouses including Telefonica and Orange. Orange even goes so far as to highlight convergence as the “bedrock of our strategy,” and has pursued M&A across Europe in order to combine fixed and mobile assets in order to pursue a convergent strategy.

Initially, European operators pursuing convergent bundles saw a reduction in churn, as including more services within a bundle for multiple people in a household made these customers stickier. Over time, operators looked to drive increased ARPU by including additional services, particularly broadcast television and video streaming. For consumers, fixed-mobile bundles also offer managerial benefits, adding the convenience of a single bill for all telecoms services in a household and gives the account holder more control over telecoms expenditure as a result.

More recently, in European markets where fixed and mobile bundles have become commonplace, we’re seeing moves to expand the value offered to customers, to avoid ARPU erosion. For Movistar, this included a recent rebrand of its Fusion offering to MiMovistar, and a move to include services such as health, gaming, and security. The key lesson for U.S. telcos is to avoid a race to the bottom that will harm margins and ultimately investment. Instead, telcos should focus on extending the value delivered from fixed-mobile bundles. For cable companies with MVNO agreements driving Wi-Fi offload for their mobile customers can help improve performance. It also keeps wholesale costs down, allowing them to be more aggressive with their mobile pricing.

U.S. fixed-mobile service overlap — battle lines drawn

To estimate the current overlap in fixed and mobile subscriptions by provider and look at bundling opportunities within the U.S.,  we used Speedtest Intelligence data to show the share of Speedtest® samples for mobile devices conducted via wireless networks versus Wi-Fi. Cable operators Spectrum (Charter) and XFINITY (Comcast) show very high degrees of overlap, as explained by their sales model where mobile is not offered as a standalone service, but only as an add-on to their fixed broadband subscriptions services.

Overlap in fixed and wireless subscriptions (Q3 2022 | Speedtest^® Data)

Three main takeaways emerge from the data:

1. AT&T has a larger wireline footprint than Verizon, and this shows over 20% of its wireless customers also access AT&T’s fixed broadband service according to Ookla Speedtest data versus Verizon’s 10.9%. Both companies have opportunities to drive further mobile uptake among their fixed user bases.
2. T-Mobile has a greenfield opportunity for fixed wireless, where strong 5G network performance should help it capitalize on both mobile and fixed net additions.
3. Sizeable proportions of the big three’s mobile user base (in excess of 40%) accessing fixed Wi-Fi via either Charter or Comcast, represent a significant opportunity for the cable companies to expand their mobile user bases.

Beyond fixed-mobile bundling — driving experiential improvements to network service

The advent of 5G, alongside the COVID-19 pandemic, has helped drive growth in the use of data intensive services including video calling, video streaming, and mobile gaming. As these services continue to grow in popularity, and as consumers begin to demand more immersive extended reality (XR) experiences that push the boundaries of today’s networks, so operators will need to improve the performance of both fixed and mobile networks, while also looking to opportunities for network convergence to support enhanced service experiences and reduced operational costs.

High-throughput 5G service utilizes higher frequency spectrum bands than has been used for previous generations of mobile technology. These spectrum bands have lower propagation properties, particularly in-building, mandating that operators further densify their networks to offer consistent performance. Operator Wi-Fi hotspot networks can offer an alternative to this, providing a secure fixed network connection in locations where 5G signals can often degrade. In the U.S., cable companies have also begun to offer differentiated network speeds to their mobile subscribers when connected to their Wi-Fi networks, provisioning faster network speeds to capable smartphones.

Standards bodies have also identified a need to help drive fixed-mobile convergence. The development of Wireless Wireline Convergence (WWC) standards by 3GPP and the Broadband Forum (BBF) seeks to allow operators to converge existing fixed and mobile technology stacks using a common 5G core network. In doing so, operators will move to a single control plane for fixed and mobile sessions, enabling them to offer customers seamless connectivity via fixed and mobile access while also allowing them to aggregate the performance of both access networks to help drive enhanced performance and reliability. In doing so, this will allow operators to streamline the set of network functions and processes required to operate their networks, while also allowing them to simplify their Operational and Business Support Systems (OSS and BSS).

Leading operators such as Deutsche Telekom and BT are actively moving in this direction, with Deutsche Telekom in September conducting a proof of concept lab trial of WWC standards to steer traffic from a 5G residential gateway and route traffic along the entire wireline access chain to the core network. According to Ahmed Hafez, VP of network convergence at Deutsche Telekom, “convergence will allow us to optimize our network assets and deliver new, differentiated service experiences to our customers regardless of the access used.” BT has also signaled its intent to move to a single transport and core network serving both fixed and mobile services as it looks to accelerate the convergence of its mobile and fixed services in the U.K. under a single brand, EE.

While it’s clear that pioneers in the industry are looking to push the envelope on fixed-mobile convergence, there’s still a long way to go. We look forward to more operator trials of WWC standards, but ultimately it will also require the vendor ecosystem to integrate these standards in their product roadmaps to help spur adoption. If you’re interested to find out more about Ookla Speedtest Intelligence, and its wealth of fixed and mobile consumer initiated data and insights, please get in touch.

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