Back in 2014, working at Deutsche Telekom AG and responsible for Technology Economics, we looked at alternatives to fiber deployment in Germany (and other markets). It was clear that deploying fiber in Germany would be massively costly and take a very long time… As an incumbent solely relying on xDSL, there was unease in general and in particular with observing that HFC (hybrid-fiber-coaxial) providers were gaining a lot of traction in key markets around Germany. There was an understanding that fiber would be necessary to secure the longer-term survivability of the business. Even as far back as 2011, this was clear to some visionaries within Deutsche Telekom. My interest at the time was whether fixed wireless access (FWA) solutions could be deployed faster (yes, it could and can, at least in Germany) and bridge the time until fiber was sufficiently deployed and with an economically attractive uptake that allowed an operator to retire the FWA solution or re-purpose it for normal mobile access. It economically did not make sense to deploy FWA everywhere … by far not. Though we found that in certain suburban and rural areas, it could make sense to deploy FWA solutions. … So why did it not happen? At the time, the responsible executives for fixed broadband deployment (no, no converged organization at the time) were nervous that “their” fiber Capex would be re-prioritized to FWA and thus taken away from their fiber deployment. Resulting in even further delays in fiber coverage in Germany. Also … they argued the write-off of fiber investments (e.g., 15 – 20+ years) is so much much longer compared to FWA (e.g., 5 – 7 years), and when factoring in the useful lifetime of fiber versus FWA, it made no sense to deploy it (of course ignoring that we could deploy FWA within 6 months while the fiber in that area might not be present in the next 10+ years;-).
I learned three main lessons (a lot more, actually … but that’s for my memoirs if I remember;-)
- FWA can be made economically favorable but not universally so everywhere.
- FWA can be a great instrument to bridge the time until fiber deployment has arrived and a given demand (uptake) in an area exists (you just need to make sure your FWA design accounts for the temporary nature of the purpose of your solutions).
- FWA at high frequencies (e.g., >20 GHz) is not “just” an overlay of an MNOs existing mobile network. The design should be considered a standalone network, with maximum re-use of any existing infrastructure, with line-of-sight (LoS) to customers and LoS redundancy build-in (i.e., multiple redundant paths to a customer).
We are now 10+ years further (and Germany is still Europe’s laggard in terms of fiber deployment and will remain so for many years to come), and the technology landscape that supports both fiber and fixed wireless access is much further as well…
In the following, it is always good to keep in mind that
“Even if your something appears less economically attractive than something else, if that something else is not available or present, your solution may be an interesting opportunity to capture growth to your business. At least within a given window of opportunity.”
and, so it begins …
FIXED WIRELESS ACCESS (FWA).
In this blog, I will define Fixed Wireless Access (FWA) as a service that provides a fixed-like wireless-based internet broadband connection to a household. FWA bypasses the need for a last-mile fixed wired connection from a nearby access point (e.g., street cabinet) to a customer’s household. Thus substituting the need for a fixed copper, coax, or fiber last-mile connection. I will, in general, position FWA in a modern context of 5G, which may enable existing MNOs to bridge the time until they will have fiber coverage, for example, rural and sub-urban areas. Or, as the thinking goes (for some), completely avoid the need for costly and (allegedly) less profitable deployment of fiber in less household-dense areas where more kilometer of fiber needs to be deployed in order to reach the same amount of households compared to an urban or dense urban area. Of course, companies may also be tempted to build FWA-dedicated ISP networks operating in the mmWave range (i.e., >20 GHz) or in the so-called mid-bands range (e.g., ≥ 2.5 GH, C-band, …) to provide higher quality internet services to sub-urban and rural customers where the economics for fiber coverage and connectivity may be comparably challenged in terms of economics and time to fiber availability.
Figure 1 below provides an overview and comparison of the various ways we connect our customers’ homes, with the exception of LEO satellite and stratospheric drone-based connectivity solutions (it’s another very interesting story). So, illustrating terrestrial network-based connectivity to the household with either a fixed-line (buried or aerial) or wireless.
For the wireless connection between the service provider’s access network and the household, we have several options;
(1) The Fixed Wireless Access (FWA) network provides a dedicated wireless link between the service provider’s network and the customer’s home. In order to maximize the customer experience, typically, an outdoor customer premise antenna (CPA) would have to be installed on the exterior of a household, offering line-of-sight with the provider’s own advanced antenna residing on its access network infrastructure. The provider will likely dedicate a sufficient amount of wireless spectrum bandwidth (in MHz) to provide a competitive (to fixed) broadband service. In a 5G SA (standalone) setting, this could be a cellular spectrum in the mid-band range (≥ 2.5 – 10 GHz) or (or and) mmWave spectrum above 20 GHz. An access network providing fixed-wireless services in the mid-band spectrum typically would overlay an existing mobile network (if the provider is also an MNO) with possibly site additions allowing for higher-availability services to households as well as increase the scale and potential of connecting households due to increased LoS likelihood. In case the services rely on mmWave frequency bands, I would in general, expect a dedicated network infrastructure would have to be built to provide sufficient household scale, reliability, and availability to households in the covered broadband service area. This may (also) rely on existing mobile network infrastructure if the provider is an established MNO, or it may be completely standalone. My rule of thumb is that for every household that is subscribing to the FWA service, I need at least 2, preferably 3, individual line-of-sight solutions to the household CPA. Most conventional cellular network designs (99+% of all there are out in the wild) cannot offer that kind of coverage solution.
The customer premise antenna (CPA) connects to the household’s customer premise equipment (CPE). The CPE provides WiFi coverage within the household either as a single unit or as part of a meshed WiFi household network.
(2) A service that is based on Fixed Mobile Substitution (FMS) utilizes existing cellular resources, such as infrastructure and spectrum bandwidth, to provide a service to a cellular-based (e.g., 4G/5G) customer premise equipment (CPE) residing inside a customer’s household. The CPE connects to the mobile network (via 4G and/or 5G ) and enjoys the quality of the provider’s mobile network. Inside the household, the CPE offers WiFi coverage that is utilized by the household’s occupants. As existing mobile resources are shared with regular mobile customers that may also be in the same household as the FMS solution itself, the service provider needs to carefully balance capacity and quality between the two customer segments, with the household one typically being the greedy one (with respect to network resources and service plans) and impacting network resources substantially more than the regular mobile user (e.g., usually 20+ to 1).
FWA has been around the telco and ISP toolbox for many years in one form or another. The older (or let’s put it nicer, the experienced) reader will remember that a decade ago, many of us believed that WiMax (Worldwide Interoperability for Microwave Access) was the big thing to solve all the ailing (& failings) of 3G, maybe even becoming our industry’s de facto 4G standard. WiMax promised up to 1 Gbps for a fixed (wireless) access base station and up to around 100 Mbps at low mobility (i.e., <50 km per hour). As we know today, it should not be.
FAST FORWARD TO TODAY & TOMORROW WITH 5G AND FIBER SERVICES.
GSMA (GSM Association, the mobile interest group) has been fairly bullish on the advantages and opportunities of 5G-based Fixed Wireless Access (5G-FWA). Alleging a significant momentum behind FWA with (1) 74+ broadband service providers launching FWA services globally, (2) Expecting 40 million 5G FWA subscribers by 2025. Note globally, as of October 2022, there were 5.5 billion unique mobile subscribers. So 5G FWA amounts to <1% of unique subscribers, and last but not least (3) They expect up to 80% cost saving versus fiber to the home (FTTH) @ 100 Mbps downlink. GSMA lists more advantages according with GSMA but the 3 here are maybe the most important.
According to GSMA, in Western Europe, they expect roughly around 275+ million people will subscribe to 5G by 2025. This number represents ca. 140 million unique 5G households. Applying household scaling between western Europe and Global on the global total of 40 million 5G FWA HH, one should expect to capture between 4 to 5 million 5G FWA households or ca. 2.5% FWA HH penetration in Western Europe by 2025 (see below for details of this estimate). This FWA number also corresponds to a ca. 4% of all unique 5G households, or ca. 2% of all unique 5G subscribers, or ca. 1% of all unique mobile subscribers (in 2025). While 40 million (5 million) globally (in Western Europe) sounds like a large number, it is, to all effects rather minuscule and underwhelming compared to the total mobile and fixed broadband market.
The GSMA report, “The 5G FWA opportunity: series highlights” (from July 2022) also provides a 2025 projection for 5G FWA connections as a percentage of households across various countries. In Figure 3 below, find the GSMA projections with, as a comparison, the estimated fiber-to-the-home connections (FTTH) in 2025 and, for reference, the actual FTTH connections in 2021. It seems compelling to assume that 5G FWA would be an alternative to fiber at home or an HFC D3.1 (D = Docsis) connection. Of course, it is only possible to get a service if the technology of choice covers the household. A fiber connection to your household requires that there is a fiber passing in the proximity of your household. Thus the degree of fiber coverage is important in order to assess the fiber subscription uptake possible. Likewise, a 5G FWA connection requires that the household is within a very good and high-quality 5G coverage of the FWA provider (or the underlying network operator). Figure 4 below provides an overview of 2021 actual and 2026 (projected) fiber-based household coverage (i.e., homes passed) percentages in Western Europe.
If we take a look at 5G coverage, which may be an enabler for FWA services that can compete with fiber quality, it would be fairly okay to assume that most mobile operators in Western Europe would have close to a full 5G population (and households) coverage. However, accessing the 5G quality of that coverage would be problematic. 5G coverage may be based on 700 MHz piggybacking on LTE (i.e., non-standalone, NSA 5G), providing nearly 100% household coverage, it may involve considerable mid-band (i.e., > 2.1 GHz frequency bands) 5G coverage in urban and suburban areas with varying degree of rural coverage, it may also involve the deployment of mmWave (i.e., >20 GHz frequency bands) as an overlay to the normal macro cellular network or as dedicated standalone fixed-wireless access network or a combination of both.
Actually, one might also think that in geographical areas where fiber coverage, or D3.1-based HFC, is relatively limited or completely lacking, 5G FWA opportunities would be more compelling due to the lack of competing broadband alternatives. If the premise is that the 5G FWA service should be fiber-like, it would require good quality 5G coverage with speeds exceeding 100 Mbps at high availability and consistency. However, if the fixed broadband service that FWA would compete with is legacy xDSL, then some of the requirements for fiber-like quality may be relaxed (e.g., 100+ Mbps, very high availability, …).
What are the opportunities, and where? Focusing on fiber deployment in Western Europe, Figure 5 illustrates homes covered by fiber and those with no fiber coverage in urban and rural areas as of 2021 (actual). The figure below also provides a forecast of home coverage and homes missing by 2026.
As Figure 5 above shows, the urban fiber deployment in Europe is happening at a fast pace in most markets, and the opportunities for alternatives (at scale) may at the same time be seen as diminishing apart from a few laggard markets (e.g., Austria, Belgium, Germany, UK, ..). Rural opportunities for broadband alternatives (to fiber) may be viewed more optimistically with many more households only having access to aging copper lines or relative poor HFC.
A 5G FWA provider may need to think about the window of opportunity to return on the required investment. To address this question, Figure 6 below provides a projection for when at least 80% of households will be connected in urban and rural areas. Showing that in some markets, rural areas may remain more attractive for longer than the corresponding urban areas. Further, if one views the 5G FWA as a bridge to fiber availability, there may be many more opportunities for FWA than what Figures 5 and 6 allude to.
Looking at the opportunity for fiber alternatives going forward, Figure 7 below provides the quantum of households that remain to be covered by fiber. This lack of fiber also creates opportunities for broadband alternatives, such as 5G FWA, and maybe non-terrestrial broadband solutions (e.g., Starlink, oneWeb,…). Cellular operators, with a good depth of site coverage, should be able to provide competitive alternatives to existing legacy fixed copper services, as long as LoS is not required, at least. Particularly in some rural areas, depending on the site density and spectrum commitment, around rural villages and towns. Cellular networks may not have much capacity and quality to spare in urban areas for fixed mobile substitution (FMS), at least if designed economically. This said, and depending on the cellular, and fixed broadband competitive environment, FMS-based services (4G and 5G) may be able to bridge the short time until fiber becomes available in an area. This can be used by an incumbent telco that is in the process of migrating its aging copper infrastructure to fiber or as a measure by competing cellular operators to tease copper customers away from that incumbent. Hopefully, those cellular Telcos have also thought about FMS migration off their cellular networks to a permanent fixed broadband solution, such as fiber (or a dedicated mmWave-based FWA service).
As pointed out previously, GSMA projects by 2025 ca. 5 million 5G FWA households in Western Europe. This is less than 3 out of every 100 regular households. Compared with fiber coverage of households estimated to be around 60 out of 100 by 2025. Given that some countries in Western Europe are lagging behind fiber deployment (e.g., Germany, UK, Italy, … see charts above), leaving a large part of their population without modern fixed broadband, one could expect the number might have been bigger than just a few percent. However, 5G FWA at 3.x GHz, and at mmWave frequencies require line-of-sight connections to a customer’s household to provide fiber-like quality and stability. Cellular networks were (obviously) never designed to have LoS to its customers as the cellular frequencies (≤ 3 GHz) were sufficiently low not to be “bothered” (too much) by penetration losses. At and above 3 GHz LoS is increasingly required if a fiber-like service is required.
Another aspect that is often under-appreciated or flat-out ignored (particularly by cellular-minded marketing & sales professionals), is the need for an exterior household customer premise antenna (CPA) that will allow a household to pick up the FWA signal at a higher quality (compared to a gateway antenna indoor due to penetration loss) and with minimum network interference, which may reduce overall quality and capacity in the cellular network (that coincidentally will hurt the normal cellular user as well as other FWA customers). The reason for this neglect is, in my opinion, that it is (allegedly) more difficult to sell such as product to cellular-minded customers and to cellular-minded salespeople as well. It also may increase the cost of technical support due to more complex installation procedures (compared to having a normal mobile phone or indoor gateway) than just turning on a cellular-WiFi modem box inside the home, and it may also result in higher ongoing customer service cost due to more components compared to either a cellular phone or a cellular modem.
GSMA Intelligence group compared the total cost of ownership (TCO) of a dedicated 5G FWA mmWave-based connection with that of fiber-to-the-home (FTTH) for an MNO with an existing 5G network in Europe. It appears that the GSMA’s TCO model(s) are rich in detail regarding the underlying traffic models and cost drivers. Moreover, it would also appear that their TCO analysis is (at least at some level) based on an assumed kilometer-based TCO benchmark. It is unclear to me whether Opex has been considered. Though given the analysis is TCO, I assume that it is the case it was considered.
GSMA (for Europe) found that compared to fiber-based household connectivity, 5G FWA is 80% cheaper in rural areas, 60% cheaper in suburban, and 35% cheaper in urban areas compared to an FTTH deployment.
My initial thoughts, without doing any math on the GSMA results, was that I could (easily) imagine that 5G FWA would require less absolute Capex compared to deploying fiber to the home. At least for buried fiber deployment. I would be less confident wrt this result when it comes to aerial fiber deployment, but maybe it is also still a valid result. However, when considering Opex, what 5G FWA incrementally contributes, I would be much less sure that 5G FWA would be outperforming FTTH. At the least in rural and suburban areas where the household customer density per 5G FWA site would be very low (even before considering the opportunity based on LoS likelihood). Thus, the 5G FWA Opex scaled with the number of household subscribers may be a lot less favorable than FTTH, considering the access energy consumption and technical support costs alone. This is even before considering whether a normal rural and a suburban cellular network is at all suitable (designed for) for providing high availability and high-quality+ fixed-like broadband services delivered by 3.x GHz or mmWave frequencies (which in rural and suburban areas may be even more problematic on existing cellular networks).
I would generally not expect that the existing rural/suburban cellular network would be remotely adequate to permanently replace the need for fiber-connected homes. We would most likely need to densify (add new sites) to ensure high quality and high availability connectivity to customers’ premises. This typically would translate into line-of-site (LoS) requirements between the 5G FWA antenna and the customers’ households. Also, to ensure high availability, similar to a fiber connection, we should expect the need for redundant LoS connectivity to the customers’ households (note: experience has shown that having only one LoS connection compromises availability and consistency/reliability substantially). Such redundant connectivity solutions would be even more difficult to find in existing cellular networks. These considerations would, if considered, both add substantial Capex and additional Opex to the 5G FWA TCO reducing the economical (and maybe commercial) attractiveness compared to FTTH.
HOW TO MAKE APPLES AND ORANGES MORE LIKE BANANAS.
As mentioned above, GSMA appears to base (some of) its economic conclusions on a per kilometer (km) unit driver. That is Euro-per-km. While I don’t have anything particular against this driver, apart from being rather 1-dimensional, I believe it provides fewer insights than maybe others’ more direct drivers of income, capital, and operational cost as well as, in the end, a given solution’s commercial success.
I prefer to use the number of households (HH) per square kilometer, thus HH per km2. For fiber deployment and household coverage, I would use fiber per HH passed (HHP). Fiber connecting the household, providing the actual connection (“the last mile”) to customers’ home, I use fiber HH connected (HHC). The intention behind fiber coverage, what is called household passed, is to be able to connect households by extending the fiber to the “last mile” (or the last-1.61-kilometer) and start generating revenues that return on the capital investment done in the first place. Fiber coverage can be thought of as a real option to connect a home. Fiber coverage is obviously a necesity for connecting a home. Similarly, building dedicated fixed-wireless access infrastructure, incrementally on existing cellular infra or from scratch, is to provide a fixed-like high-quality wireless connection to a household.
Thus household density is a very important driver for the commercial potential, as well as how much of the deployment capital and operational cost can be assigned to a given household in a given geographical area. Urban areas, in general, have more households than suburban and rural areas. The deployment of Capex and Opex in urban areas will be lower per household than in suburban and more rural urbanized areas.
Every household that is fiber covered, implying that the dwelling is within a short reach of the main fiber passing through and ultimately connected, requires an investment with an operational cost associated and revenue for the service is supported by the connection. Fiber total cost of ownership (TCO) will depend on the amount of households covered and the number of households directly connected to a paying customer. For the fiber deployment economics, I am using data from my “Nature of Telecom Capex” (see Figure 16, and please note that the data is for buried fiber) that provides the capital cost of fiber coverage (households passed) and for homes fiber connected, both as a function of household density. For fiber homes passed (HHP) economics, I am renormalizing to fiber homes connected (HHC). Thus if 90% of homes are covered (i.e., passed) in an area and 60% of the homes passed are connected, those connected homes pay for the remaining unconnected homes (30%) under the fiber coverage. This somewhat inflates the cost of connecting a home but is similar to the economic logic of cellular coverage, where the cost is paid by customers having access to the cellular site, even if the cellular site usually covers a lot more people than customers.
In general, fiber deployment becomes increasingly costly as the deployment moves from denser urbanized areas out to suburban and finally rural areas as the household density decreases and more area (and kilometers) need to be covered to capture the same amount of households as in urban areas. Also, it is worth keeping in mind that in countries with the possibility of substantial aerial fiber deployment (e.g., Spain, France, Portugal, Poland, etc..), this leads to a significant unit cost reduction in comparison to buried fiber deployment as we know it from Germany, Netherlands and Denmark. Figure 4 above provides an overview of Western European countries with aerial fiber deployment possibilities and those where buried fiber is required.
For an incremental FWA solution, an existing cellular site will be used. The site location will offer a coverage area where normal broadband cellular services can be provided. Households can of course be connected either via a normal mobile device or a dedicate inhourse gateway connecting to the cellular network (possibly via an exterior CPA) and offering indoor WiFi coverage. For scalable fiber-like wireless quality (e.g., stability and speed) of effective speeds exceeding 100+ Mbps per household connection to be offered from a normal cellular site we typically need line-of-site (LoS) to a customer home as well as a substantial amount of dedicated spectrum bandwidth (100+ MHz) provisioned on an advanced antenna system (AAS e.g., massive MiMo 64×64). The 5G FWA solution, I am assuming, is one that requires the receiving customer to have an outdoor antenna installed on the customer’s home with LoS to the cellular site hosting the FWA solution. The solution is assumed to cover 1 km2 (range of ca. 560 meters) with an effective speed of 300 Mbps per connection. That throughput should hold up to a given connection load limit, after which the speed is expected to decrease as additional household connections are added to the cellular site.
One of, in my opinion, the biggest assumptions (or neglects) of the fiber-like 5G FWA service to households at scale (honestly, a couple of % of HH is not worth discussing;-) is the ability to achieve a line-of-sight between the provider’s cellular site antenna and that of a household with its own customer premise antenna (CPA). For 3.x GHz services, one may assume that everything will still work nicely without LoS and with an inhouse gateway without supporting exterior CPA. I agree … with that premise … if what is required is to beat a xDSL or poor HFC service. There are certainly still many places in Western Europe where that may even make good business sense to attempt to do (that is, competing inferior fixed legacy “broadband” services). The way that cellular networks have been designed (which obviously also have to do with the relative low cellular frequency ranges of the past) is not supporting LoS at scale in urbanized environments. Some great work by professor Dr Akram Al-Hourani, summarised in Figure 9 below, clearly illustrates the difficulty in achieving LoS in urban areas. While I am of the opinion that the basic logic of urban LoS is straightforward, it seems that cellular folks tend to be so used to having (good) cellular coverage pretty much anywhere that it is forgotten when considering higher frequencies that work much better at (or only with) line-of-sight.
The lack of LoS in areas targeted for 5G FWA services needs to be considered in the economic analysis. At least if you are up against fiber-like quality and your intention is to compete at scale (some household opportunity as is the case for fiber). For your FWA cellular-based network, this would often require some degree of densification compared to the as-is cellular network that may be in place. In my work below, I have assumed that my default 5G FWA configuration and targeted service requires 6 sectors covering a 1 km2 of a given urbanized household density. The consequence of that may be that a new (greenfield) site will be required in order to provide 5G FWA at scale (>10+% of HH).
The economics of this solution is straightforward. I have an upfront investment in enabling the FWA solution with a targeted quality level (e.g., ). In a first approximation and up to a predefined (and pre-agreed as sellable with Marketing), this investment is independent of the number of household customers I get. Of course, at some given load & quality conditions, the FWA capacity may have to be expanded by, for example, adding more capable antennas, more FWA (relevant) spectrum, additional sectors, or building a new site. It should be noted that I have not considered the capacity expansion part in the presented analysis in this article. Thus, as the amount of connected FWA households increases, the quality, in general, and speed, in particular, would decrease (typically by a non-linear process).
Most cellular networks have a substantial part of their infrastructure that does not generate any substantial amount of traffic. In other words, its resources are substantially under-utilized in most cellular networks. Part of building a cellular network is to ensure coverage is guaranteed to almost all of the population (98%+) and geography (>90%), irrespective of the expected demand. Some Telcos’ obsession with public speed & performance tests & benchmarks (e.g., Umlaut, Ookla, etc…) has resulted in many networks having an “insane” (un-demanded and highly un-economical) amount of capacity and quality in coverage areas without any particular customer demand. This typically leads to industry consultants proposing to use all that excess quality for what they may call FWA. I would call it FMS (but what’s in a name). Though, even if there may be a lot of excess cellular capacity and quality in rural and subs-urban areas, it’s hardly fiber-like. And it is also highly unlikely to offer the same scale opportunity in terms of households as a fiber deployment would do (hint: LoS likelihood). The opportunity that is exploitable is to compete with xDSL and poor-quality HFC (if available at all). If an area doesn’t have fiber and no good quality coax, that excess cellular capacity can be used as an alternative to xDSL.
To provide competitive fiber-like FWA services with wireless on top of an existing cellular network, we need to design it “right”. Our aim should be a speed well above 100 Mbps (e.g., 300 Mbps) with stability and availability that requires a different design principle than current legacy cellular networks. To provide a 300 Mbps wireless household connection we could start out with a bandwidth of 100 MHz at 3.5 GHz (i.e., 5G mid-band as an example). Later it is possible to upgrade to or add a mmWave solution with even more bandwidth (e.g., 20 to 300 GHz frequency range with bandwidths of multiples of GHz). In order to get both stability and availability, I will assume that I need a minimum of two but preferably three different LoS solutions for an individual household. If no fiber or other high-quality fixed broadband competitors are around, this requirement may be relaxed (although I think a minimum of two LoS connections are required to provide a real fixed broadband alternative at frequencies above 3 GHz).
SOME COMPARATIVE RESULTS.
In my economic analysis of fiber deployment and 5G-based fixed wireless access, the total cost of ownership (TCO) is presented relative to the number of households connected. This way of presenting the economics has the advantage of relating costs directly to the customer that will pay for the service.
The Capex for fiber deployment can be broken up into two parts. The first part is the fiber coverage, also called fiber household passed (HHP). The second part is household connected (HHC), connecting customer households to the main fiber pass, which is also what we like to call Fiber to the Home (FTTH).
The capital expense of fiber coverage is mainly driven by the civil work (ca. 70%, with the remainder being ca. 20% to passive and ca. 10% for the active part) and relates to the distance fiber is being laid out over (yes, there is a km driver there;-). The cost can be directly related to household density. We have an economic relationship between deployment cost and the actual household density reflecting the difference in unit deployment cost between urban (i.e., high household density, least unit Capex), suburban, and rural (i.e., low household density and highest unit Capex ) urbanized areas. You need fewer kilometers to cover a given amount of households in dense urban areas than is required in a rural village with spread-out dwellings and substantially lower household density. In my economic analysis, I re-scale the fiber coverage cost to the number of households connected (i.e., the customers). Similar to household coverage cost, the household connection cost can likewise be related to the household density, which is already a measure of the connection cost. The details have been described in details in my earlier article, “The Nature of Telecom Capex.”.
The capital expenses related to fixed wireless access will, by its very nature, have a fairly large variation in its various components making up the total investment to provide fixed-like services to customer households. It will depend critically on the design criteria of the service we would like to offer (e.g., max & min speed, availability, … ) as well as the cellular network’s starting point (e.g., greenfield vs brownfield, site density, the likelihood of customer household LoS, etc..). Furthermore, supplier choice, including existing supplier lock-in and corporate purchasing power can influence the unit Capex substantially as well. Civil works and passive infrastructure is reasonably stable across western Europe, with a minor dependency on a given country’s income levels for the civil work-related cost. In my experience, the largest capital expense variation will be on the active telecom equipment depending heavily on procurement scale and supplier leverage. As I have worked in the past for a Telco which is imo&e is one of the strongest (in the industry) in terms of purchasing power and supplier leverage, there is a danger that my unitary Capex assessment may be biased towards the lower end of a reasonable estimate for an industry average for the active equipment required. Another Capex expense factor associated with substantial variation is the spectrum expense I am using in my estimate. My 5G FWA design example requires me to deploy 100 MHz at 3.x GHz (e.g., 3.4 – 3.7 GHz). I have chosen the spectrum cost to be the median of 3.x GHz European spectrum auctions from 2017 to 2023 (a total of 22 in my dataset). The auction median cost is found to be ca. 0.08 € per MHz-pop, and the interquartile range (as a measure for variation) is 0.08 € per MHz-pop. Using an average number of people per Western European household of 2.2, assuming a telco market share of 30%, and a 100 MHz bandwidth, the spectrum cost per connected household would be ca. 60 Euro (per HHC).
In general, the cost of connecting households to fiber scales directly (strongly) with the household density. The cost of connecting a household with fixed wireless access only scales very weakly with the household density (e.g., via CPA, CPE, technical support). Although, if the criteria are that FWA will have to continue to deliver a very high target speed and availability, as the household density increases, there will be substantial step function increases in the required Capex and subsequent resulting Opex. FWA TCO per connected house becomes prohibitively costly as the household density decreases, as is the case for normal cellular services as well.
The total cost of ownership (TCO) includes both the capital as well as the operational expenses relating to the technical implementation of the fixed (FTTH) and fiber-like broadband (5G FWA) service. The various components included in the TCO analysis are summarised in Figure 10.
In my analysis, I have compared the cost of implementing different FWA designs with that of connecting a household with fiber. I define a competitive 5G FWA service as a service that can provide a similar quality in terms of speed and stability as that of a GPON-based fiber connection would be able to. The fiber-to-the-home service is designed to bring up to 1 Gbps line speed to a household and could, with the right design, be extended to 10 Gbps with XGPON at a relatively low upgrade capital cost. The FWA service targets an effective speed of 300 Mbps. As household connections are added to the 5G FWA site, at some point, it would become unlikely that the targeted service level can be maintained unless substantial expansions are made to the 5G site, e.g., adding a mmWave solution with a jump in additional frequency spectrum (>100MHz). This would likely lead to additional unit Capex and increases in operational expenses (e.g., energy cost, possible technical support costs, etc..).
Assuming 6 cellular sectors for my chosen 5G FWA solution with 3 of those sectors being greenfield (e.g., abbreviated 3Si + 3Sn), Figure 11 shows that for 5G FWA at scale and targeting competitive services (in terms of quality and stability), is rarely a more economical solution (based on TCO) compared to fiber. Only at high household densities does 5G FWA become economically as attractive as fiber-to-the-home. Although the problem with 5G FWA at large household densities is, that the connection load may be too high to maintain the service design specifications, e.g., speed and availability, without substantial additional upgrades (e.g., mmWave, additional spectrum & sector densification). Even if 5G FWA on a per connected home is (much) more Capex efficient, the economics of Fiber deployment and household fiber connections are more scalable to the connected home than a fixed-like wireless service will be at low and medium household densely urbanized areas.
Relaxing the 5G FWA configuration will not help much as Figure 12 below illustrates. Only in cases where a single existing site (with 3 sectors) can offer a reasonable LoS scale to customer’s households may the TCO be brought down to a comparable range as that of fiber to the home (for a given household density, that is). Using Professor Al-Hourani results one can show that if no receiving household point (e.g., height of building + antenna) is heigher than 15 meter (max. three story buildings) the maximum amount of households with LoS should be no more than 20%. Given that in more rural and suburban environment buildings may be more likely to be a lot lower in exterior height than 15 meter (e.g., 5 – 10 meters) the number of households with LoS (from a single point) could be substantially lower than 20%. In addition, to having a LoS to a household, it, of course, also needs to be your customers premise. Say you have a market share of 30%, one should not expect within a given coverage area to have a potential of more than maybe a maximum of 6% (and likely a lot lower than that). This of course makes any dedicated 5G FWA investment prohibitedly costly due to the lack of scale.
All in all, using dedicated 5G FWA (or 4G FWA, for that matter) is unlikely to be as economical as a household fiber connection. In rural and suburban areas, where the load may be less of an issue, the existing cellular network’s intercellular distances tend to be too large to be directly usable for fiber-like services. Thus, requiring site densification. In denser urban areas, the connection load may require additional investment to support the demand and maintain quality (e.g., mmWave solutions). However, these places may also be the areas most likely already to be covered by fiber or high quality HFC.
Irrespective of FWA’s maybe poorer economics, in comparison with fiber deployment, there are many countries in Western Europe (and a lot of other places) that lack comprehensive fiber coverage in both urban, suburban and rural areas. Areas that may only be covered by mediocor xDSL services and whatever broadband mobile coverage support. Geograophical areas where fiber may only be deployed years from now if ever at all (unless encourage by EU or other non-commercial subsidies). Such under-served fiber areas may still be commercially interesting for cellular infrastructure telcos, levering existing infra, or dedicated FWA ISPs that may have gotten their hands on lower cost mmWave spectrum.
I should also point out that there is plenty of opportunity for operational expense improvements by deploying for example more intelligent power management systems and/or simply switching off-and-on antenna elements (in the deployed AAS/massive-MiMo antennas) in off-peak traffic hours. The service level that is offered to FWA customers may also be optimized by modern care solutions, e.g., AI chatbots, Apps, IVR, WiFi optimizer solutions, … reducing the need for human-human technical support interactions. However, assuming an FWA customer require a customer premise antenna, requires connectivity to indoor gateway and high quality WiFi coverage in the household, is likely to result in Opex increase in customer care.
IN THE NOW THOUGHTS
I don’t see, FWA, 5G or not, as a credible alternative for fiber to the home. It is doubtful on a household-connection basis that it economically is a better choice. The argument that there is an incredible amount of underutilized resources in our cellular networks, so why not use all that for providing fixed-like, and maybe even fiber-like, services to rural and suburban households, is trying to avoid being held responsible for having possible wasted shareholders money and value but focusing more on being the best irrespective of whether value-generating demand was present or not.
FWA and FMS are technology options that may bridge a time where fiber becomes available in a given geographical footprint. It may act as a precursor for broadband demand that can trigger an accelerate uptake of fiber broadband services once the households have been fiber covered. But its nature as a fiber-like service is likely temporary albeit it may be around for several technology refreshment cycles.
Though, the cellular industry will have to address the relative high operational costs associated with a cellular solution targeting fixed- and fiber-like broadband (and to be honest mobile broadband as well) in comparison with fiber-to-the-home Opex. The projected energy cost of 5G (and 6G for that matter) ecosystem is simply not sustainable nor should it be acceptable to the industry. While suppliers are quick to address the massive improvement in energy consumption per bit-rate per new technology generation, what really is relevant for the network economics is the absolute consumption.
Finally, In time and day, where sustainability and reduction of wasteful demand on critical resources is of incredible importance to our industry, not only for our children’s children but also for achieving favorable financing, shareholders & investors money, consumer trust (and their money month upon month), and possibly the executives self-image, its is difficult to understand why any telco would not prioritize their fiber deployment or fiber service uptake over an incredible resource demanding 5G FWA to either compete or substitute much greener or substantially more sustainable fiber-based services.
I greatly acknowledge my wife Eva Varadi, for her support, patience, and understanding during the creative process of writing this Blog. Of course, a lot of thanks go out to my former Technology and Network Economics colleagues, who have been a source of inspiration and knowledge. Special thank you to Maurice Ketel (who for many years let my Technology Economics Unit in Deutsche Telekom, I respect him above and beyond), Paul Borker, Remek Prokopik, Michael Dueser, Gudrun Bobzin, as well as many many other industry colleagues who have contributed with valuable discussions and important insights. Of course, I can also not get away with (not that I ever would) not thanking Petr Ledl (leading DTAG’s Research & Trials) and Jaroslav Holis (R&T DTAG) for their willingness and a great deal of patience with my many questions into the nature of advanced antenna systems, massive MiMo, what the performance is today and what to expect in terms of performance in the near future. Any mistakes or misrepresentations of these technologies in this article is solely due to me.
- Kim Kyllesbech Larsen, “The Nature of Telecom Capex”, Techneconomyblog.com (July 2022).
- Federico Agnoletto and Pau Castells, “The 5G FWA opportunity: series highlights”, GSMA Intelligence (July 2022).
- James Joiner, “5G FWA in action”, GSMA Intelligence (October 2022).
- Prysmian Group, “Energy consumption of telecommunication access networks.”, (November 2020).
- Akram Al-Hourani, “On the Probability of Line-of-Sight in Urban Environments”, IEEE Wireless Communication Letters (March 2020).
- Tom Copeland & Vladimir Antikarov, “Real Options – A practitioner’s Guide”, Texere (2001). My book version is first edition. It is an excellent book, and maybe one of the best written on Real Options. However, the 1st edition is full of mistakes & errors corrected in later editions. Make sure, if you acquire this book, to choose a later than 1st edition.
FWA EXPECTATIONS – GLOBAL & WESTERN EUROPE
Based on GSMA projections.
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