Understanding the Shifting Broadband Market

The market for broadband and home internet is shifting. Accelerating fiber and fixed wireless rollouts across the United States are challenging incumbent players, with fiber and fixed wireless experiencing continued growth even as coaxial cable and DSL subscriptions stall or decline. Small and local broadband service providers (BSPs) have been experiencing record growth, primarily at the expense of Tier 2 providers. Many of these players are fiber-first companies, targeting greenfield environments.

One emerging player type is that of the local energy co-op, making use of its existing energy infrastructure and Industry 4.0 initiatives to inexpensively deploy fiber internet service to existing customers. Small and local BSPs are increasingly outcompeting the largest of incumbents in both cost and service quality, while T-Mobile and Verizon move to capture the lower end of the market with their fixed wireless products.

The market environment for internet service providers (ISPs), including broadband service providers, is becoming more challenging. With ongoing economic pressures and the end of student loan deferment, new household formation is on the decline - especially in higher cost urban markets. Fewer households are able to afford home internet service, leading to slower broadband growth as more consumers consider mobile substitution. Making use of best practices for the acquisition and retention of customers is critical.

Declining pay TV adoption, an ongoing trend, is pointing to the need for new bundles and offerings to attract and retain home internet subscribers. Since Q1 2016, adoption of pay TV from traditional players such as BSPs and satellite companies has declined from 80% of US internet households to roughly half of these households. Many remaining pay TV households represent long-time subscribers who remain with services due to long-term contracts or inertia – and many small to mid-size BSPs report that take rates for pay TV range between 5-15% of new residential internet subscribers depending on geography and area demographics. This indicates that while pay TV remains important to a select group of customers – largely older consumers – pay TV adoption has much farther to fall.

Pay TV is no longer a top driver of retention or satisfaction for many Americans. Home phone adoption has likewise been on a downward trend, declining from 50% of US internet households in 2017 to a reported 36% in July 2022, because of high cellular phone adoption and continued growth in spam calls.

This is an excerpt from a whitepaper, Revenue at the Edge: Wi-Fi Managed Services and the Subscriber Experience, addressees the changes in the broadband market, including the decline of pay TV, the role of bundles, the impact of mobile services, and the reality of a more challenging market than during the pandemic.

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