Broadband Competitive Landscape Taking Shape, TPI Speakers Say

“Video might not be what you think of a policy driver for broadband deployment or adoption policy” but it’s why people are using the internet, Alderfer said. “That really makes it the driver for investment because networks are planned to handle peak loads.” As more use their devices to watch video, it means not only an increase in average consumption, but “even more so” growth in simultaneous consumption, he said: “That’s really what drives investment in terms of keeping up.”

Investors have a tough time making sense of the new era of competition, Yong said. “Cable is getting into telecom, telecom is getting into cable, while wireless is getting into wireline and wireline is getting into wireless,” she said. “You don’t know where the next phase of growth is coming from, and you don’t know where how the dollars are going to end up.”

Policymakers are watching how the merger and acquisition “landscape will shift” if T-Mobile buying Sprint is approved “and whether we will see a wireless player like Verizon go after cable,” Yong said. The biggest risk in investing in a cable or telecom stock “is always regulation, because investors don’t know how to handicap regulation,” she said. FCC changes to net neutrality rules create confusion, she said.

Major carrier and cable executives are “very careful” to keep capital expenditures stable, Yong said. The average household spends about $300 monthly on telecom and that isn’t growing, she said. Companies are looking at how to capture more of that, she said. If anything, there will be downward pressure on pricing and most CEOs don’t expect average spending to increase, she said.

One big change is cable operators are going big into wireless, using a combination of MVNOs and their own facilities, said Michelle Connolly, Duke economics professor and former FCC chief economist. There are some 18 million U.S. Wi-Fi hot spots, she said. In the TV incentive auction, Comcast was the third largest bidder, she noted: Cox signed up as a qualified bidder in the 24 GHz auction, “which suggests that they may have some interest in 5G.”

All major wireless carriers have excess capacity and working with the MVNOs brings in extra revenue, Connolly said. Cable use of MVNOs is “very, very recent,” dating to April and Comcast’s use of Verizon’s network. Comcast has added a million mobile customers, she said. Cable operators have to pay a wireless carrier only when a wireless customer isn’t connected to a Wi-Fi hot spot, she said. Earlier Wednesday, Comcast reported Q3 results (see 1901230039).

Connolly predicted 5G will make mobile wireless a stronger competitor. “There are numerous reasons to want to invest in 5G,” she said. “Wireless will become much more of a full substitute for fixed.” That new-generation networks will have much more throughout than 4G networks “will help with any issues of congestion,” she said. “We’re always worried about these problems, but technology has a way of moving forward.”

“There's more uncertainty about how networks are going to be used than we typically hear, and the ultimate uses of those networks will determine which investments yield the biggest payoffs,” TPI President Scott Wallsten told us afterward. Wall Street and Washington like different messages, he said. “D.C. likes higher investment and Wall Street likes lower investment.”

Panelists made clear competition will grow between wireless and wireline, Wallsten said. “The substitution between the two will continue to increase but remain imperfect until people can stream unlimited HD video to their big screens using their wireless connections,” he predicted. “We still don't understand enough about the nature of demand.”