Competitive Effects of Fixed Wireless Access on Wireline Broadband Technologies
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Hal J. Singer
Abstract
In this paper, we investigate the potential consumer savings to U.S. home broadband consumers in cable modem monopoly markets, should fixed wireless access technologies become available as a competitive alternative. We use a Choice-Based Conjoint survey and Hierarchical Bayes estimation to calculate the proportion of home broadband consumers that would switch to a fixed wireless access option if it was made available in a cable modem monopoly market. We then utilize a monopoly pricing model to estimate the downward pricing pressure this competition would place on incumbent cable modem monopoly prices. We find that fixed wireless entry at current prices would convert 18 percent of cable-only households and lead to a 37 percent reduction in the price of cable modem service. We also find entry into non-monopoly markets where a fiber-optic broadband alternative already exists, and find muted conversion rates and price reductions. Our results indicate that the deployment of fixed-wireless access would generate substantial consumer savings in cable modem monopoly markets, which constitute 30 precent all cable modem subscribers in the United States.
Funding source: Cellular Telecommunications Industry Association
Acknowledgment
We acknowledge financial support from the CTIA for the funding to conduct this research. We also thank Logan Summerlin for his research and editing contributions.
Appendix A: Survey Design
FWA Packages
Verizon advertises FWA prices at $50 per month for max speeds between 85 and 300 Mbps with 10 Mbps upload speeds. Their “plus” package costs $70 per month for max speeds between 300 and 1000 Mbps with 50 Mbps upload speeds. Verizon offers 2- and 3-year price guarantees.[64] This does not appear to be a promotional pricing tactic. Verizon offers both an “indoor” and “outdoor” equipment setup, with the former only requiring a gateway modem (placed inside the home) while the latter requires an antenna placed on the roof.[65] Verizon also offers discounted plans of $25 and $40 per month if the customer has a qualifying Verizon phone plan.
T-Mobile advertises its FWA “Home Internet” plan at $50 per month for max speeds between 33 and 182 Mbps with upload speeds between 6 and 23 Mbps.[66] T-Mobile advertises a lifetime price guarantee. T-Mobile only offers an indoor Gateway modem and does not offer an external antenna option.[67]
Cable Modem Packages
Xfinity’s cable internet offerings vary by region. Typical prices include $20–$25 per month for 75 Mbps, $25–$40 for 200 Mbps, $30–$55 for 400 Mbps, $60–80 for 800 Mbps, $60–75 for 1000 Mbps, $70–80 for 1200 Mbps, and $120 for 2000 Mbps.[68] Upload speeds are typically a tenth or less of the rated download speed: only 10 Mbps for plans under 400 Mbps, 15 Mbps for the 800 Mbps plan, and 20 Mbps for the 1000 Mbps plan. Xfinity infamously practices promotional rate pricing in which advertised prices typically increase by $20–25 after the first two years.
Spectrum’s cable internet offerings come in three standard packages, a $50 option for 300 Mbps, a $70 option for 500 Mbps, and a $90 option for 940 Mbps.[69] Upload speeds are 10 Mbps, 20 Mbps, and 35 Mbps respectively. These prices are for the first-year promotional rate, after which each price increases by $30.
Fiber Packages
AT&Ts fiber offerings are $55 for 300 Mbps, $65 for 500 Mbps, $80 for 940 Mbps, $110 for 2 Gbps, and $180 for 5 Gbps.[70] Upload speeds are symmetrical to download speeds. AT&T appears not to employ promotional pricing tactics for its fiber services.
Verizon’s fiber internet is offered at $50 for 300 Mbps, $70 for 500 Mbps, and $90 for 940 Mbps.[71] Upload speeds are symmetrical to download speeds. Verizon guarantees prices for 2, 3, and 4 years respectively, although this does not appear to be a promotional pricing tactic.[72]
CenturyLink’s fiber options are $30 for 200 Mbps or $70 for 940 Mbps.[73] Upload speeds are symmetrical to download speeds. CenturyLink does not employ promotional pricing tactics for its fiber services.
Appendix B: Appendix Tables
Respondent demographics (N = 500).
| Age | Respondents |
|---|---|
| Median | 48 |
| Average | 49.4 |
| Max | 87 |
| Min | 19 |
| Gender | Respondents |
|---|---|
| Male | 35.2 % |
| Female | 64.4 % |
| Non-binary/third gender | 0.4 % |
| Race | Respondents |
|---|---|
| White | 85.3 % |
| Black or African American | 7.7 % |
| American Indian or Alaska Native | 2.4 % |
| Asian | 2.8 % |
| Native Hawaiian or Pacific Islander | 0.0 % |
| Other | 2.0 % |
| Ethnicity | Respondents |
|---|---|
| Hispanic | 8.2 % |
| Non-hispanic | 91.6 % |
| Prefer not to say | 0.2 % |
-
Note: Since respondents were able to select more than one race, there are 509 responses from the 500 respondents.
Respondent broadband alternatives.
| Number of alternate providers | Respondents |
|---|---|
| 0 | 21.0 % |
| 1 | 34.2 % |
| 2 | 21.0 % |
| Not sure | 23.8 % |
-
Note: Alternate providers classified as the number of other companies that offer either Cable Modem or Fiber internet to the respondent’s home, aside from their current provider.
Annual long-run consumer surplus created cable-only market (alternate competitor supply elasticity of 3).
| Current state | FWA entry current price | FWA entry $10 discount | FWA entry $20 discount | |
|---|---|---|---|---|
| Market demand elasticity | 1.72 | 1.72 | 1.72 | 1.72 |
| Cable market share | 100 % | 82 % | 77 % | 67 % |
| Competitor supply elasticity | 3.00 | 3.00 | 3.00 | 3.00 |
| Own-firm demand elasticity | 1.72 | 2.75 | 3.15 | 4.00 |
| Price-cost margin | 58 % | 36 % | 32 % | 25 % |
| Product price ($50 base) | $50.00 | $32.82 | $30.58 | $27.82 |
| Price reduction | 0.0 % | −34.4 % | −38.8 % | −44.4 % |
| Cable-only yearly cable revenues ($Billion) | $15.50 | $10.17 | $9.48 | $8.62 |
| Yearly consumer savings generated ($Billion) | – | $5.32 | $6.02 | $6.87 |
Annual long-run consumer surplus created cable-only market (alternate competitor supply elasticity of 2).
| Current state | FWA entry current price | FWA entry $10 discount | FWA entry $20 discount | |
|---|---|---|---|---|
| Market demand elasticity | 1.72 | 1.72 | 1.72 | 1.72 |
| Cable market share | 100 % | 82 % | 77 % | 67 % |
| Competitor supply elasticity | 2.00 | 2.00 | 2.00 | 2.00 |
| Own-firm demand elasticity | 1.72 | 2.53 | 2.85 | 3.52 |
| Price-cost margin | 58 % | 40 % | 35 % | 28 % |
| Product price ($50 base) | $50.00 | $34.53 | $32.17 | $29.16 |
| Price reduction | 0.0 % | −30.9 % | −35.7 % | −41.7 % |
| Cable-only yearly cable revenues ($Billion) | $15.50 | $10.70 | $9.97 | $9.04 |
| Yearly consumer savings generated ($Billion) | – | $4.79 | $5.52 | $6.46 |
Annual long-run consumer surplus created cable/fiber market (alternate competitor supply elasticity of 3).
| Current state | FWA entry current price | FWA entry $10 discount | FWA entry $20 discount | |
|---|---|---|---|---|
| Market demand elasticity | 1.72 | 1.72 | 1.72 | 1.72 |
| Cable market share | 59 % | 57 % | 54 % | 50 % |
| Competitor supply elasticity | 3.00 | 3.00 | 3.00 | 3.00 |
| Own-firm demand elasticity | 5.02 | 5.28 | 5.66 | 6.45 |
| Price-cost margin | 20 % | 19 % | 18 % | 15 % |
| Product price ($50 base) | $50.00 | $49.41 | $48.64 | $47.39 |
| Price reduction | 0.0 % | −1.2 % | −2.7 % | −5.2 % |
| Cable/fiber yearly cable revenues ($Billion) | $20.67 | $20.43 | $20.11 | $19.60 |
| Yearly consumer savings generated ($Billion) | – | $0.24 | $0.56 | $1.08 |
Annual long-run consumer surplus created cable/fiber market (alternate competitor supply elasticity of 2).
| Current state | FWA entry current price | FWA entry $10 discount | FWA entry $20 discount | |
|---|---|---|---|---|
| Market demand elasticity | 1.72 | 1.72 | 1.72 | 1.72 |
| Cable market share | 59 % | 57 % | 54 % | 50 % |
| Competitor supply elasticity | 2.00 | 2.00 | 2.00 | 2.00 |
| Own-firm demand elasticity | 4.32 | 4.52 | 4.83 | 5.45 |
| Price-cost margin | 23 % | 22 % | 21 % | 18 % |
| Product price ($50 base) | $50.00 | $49.35 | $48.48 | $47.07 |
| Price reduction | 0.0 % | −1.3 % | −3.0 % | −5.9 % |
| Cable/fiber yearly cable revenues ($Billion) | $20.67 | $20.41 | $20.05 | $19.46 |
| Yearly consumer savings generated ($Billion) | – | $0.27 | $0.63 | $1.21 |
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