Analyst Angle: Many will truly cut the cord with 4G and 5G

The broadband performance and economics of cellular with 4G and 5G is making it possible for many of us to do without any wired connection at all - already including those who, on average, stream up to an hour of video per day. Nevertheless, most homes will continue to need fixed connections; but 5G fixed-wireless access will serve many of these.

What makes the cut?

According to Wikipedia, "in broadcast television, cord-cutting refers to the pattern of viewers, referred to as cord cutters, cancelling their subscriptions to multichannel subscription television services available over cable, dropping pay television channels or reducing the number of hours of subscription TV viewed in response to competition from rival media available over the Internet such as Amazon Video, Hulu, iTunes, Netflix, Sling TV, and YouTube." But when it comes to viewing at home, almost all of us stream, for at least some of the time, over a wired external connection; even if the final connection to our smartphone, tablet, PC or TV is over WiFi.

The original notion of cord-cutting predates the above to the early 2000s when significant substitution of mobile for fixed voice calling minutes was followed by many households entirely abandoning their landlines for voice calling.

Developing nations, including the former communist nations of Eastern Europe since 1990, "reconstructed" by increasing their teledensities from low levels in many cases with cellular instead of by building-out wireline networks because cellular was cheaper and quicker to deploy. Consumers there were not true cord cutters because they had no choice and nothing to cut. A major unforeseen drawback for them subsequently, with the residential broadband Internet boom commencing in the 2000s, was revealed when other nations, whose universal service for telephony was provided by wireline networks, were serendipitously able also to provide broadband Internet service by adding DSL technologies.

In some of these regions and even in rural locations and elsewhere with poor wireline infrastructure in hitherto developed nations, cellular with 3G and 4G improvements, where available, has also, by necessity not by choice, been the only way to obtain broadband Internet access for many.

So far, cellular has generally provided inadequate broadband data performance. Cellular networks could not keep up, technically or economically, with the ever-increasing demands of users at home- most recently including the streaming of entire TV shows and movies at rates of around 1GB per hour.

In most cases, absent price regulation and cross-subsidies, cellular prices (i.e., per GB consumed) are also significantly higher than those paid by wireline broadband customers.

However, it is now possible that large proportions of us who have a choice will soon plump for using cellular for all communications rather than retaining wireline connections for some of our needs. Cellular is increasingly competitive with wireline networks, including fiber, for broadband data as well as for voice.

There is a fundamental imperative in all kinds of mobile-for-fixed substitution. When one kind of connection can do pretty much everything, the other one can without costing more than the total of having both, the other connection will be dropped to save money. As soon as mobile coverage at home was adequate and mobile calling became sufficiently cheap, for many people, there was no longer any good reason to pay the fixed monthly charges of also having a wireline phone connection.

Don't leave home without it

In 2017, smartphone users' average monthly data consumption was 7.1GB in North America and 4.1GB in Western Europe, according to the Ericsson Mobility Report. Fixed broadband users in developed nations commonly consume 100GB or so, generally with no limit and for a flat monthly charge. The latter typically serves several users such as in a family of four with a couple of offspring, including children or still-living-at-home adults. For reasons of service performance, simplicity and price it has generally made good sense to maintain both cellular and fixed broadband services.

Nevertheless, total cord-cutting including all broadband communications already is beginning to be significant in some circumstances with 4G. For example, my 22-year-old daughter has just started a new London flatshare with three other millennials. Nobody there has gotten around to subscribing to a fixed broadband service yet -let alone to a cable or satellite TV service, which seems very unlikely. My daughter insists she is content to watch all her video on her smartphone and is not even inclined to stream video on her PC. While no longer living in a flat with WiFi (i.e., fixed broadband), within a few weeks there, and with a decent LTE signal, she busts the monthly 20GB limit on her SIM-only service plan with Vodafone. That plan costs £20 ($28), but for £30 she could have 50GB. I reckon the latter would probably be sufficient for all her needs, including occasional video binges, for the rest of her short tenancy. Vodafone charges new customers £23 per month for fixed broadband service (25Mbps). Her share of that would be £5.75 if everyone agrees to opt-in, which is far from certain and this would require someone to coordinate the subscription including installation and payments. She is rather indifferent, or unmotivated, to add fixed broadband rather than remaining mobile-only because the latter only costs £4.25 more.

"Unlimited" data plans on smartphones might also encourage some folk not to bother with a fixed connection. However, in the US, for example, AT&T throttles after 22GB has been consumed in any billing period: "speeds may slow in congested areas" to levels that are unacceptably low for video. These constraints would be unacceptable to my daughter but might be fine for many lighter users. Alternatively, zero-rated video streaming services were first introduced to the US with T-Mobile's "Binge On" a couple of years ago.

How broadly might cellular go in substituting for existing or prospective fixed services? 5G promises the kinds of data speeds-hundreds of megabits or even gigabits per second-that LTE can rarely deliver in practice. That is increasingly important with the trend toward watching UHD video on all kinds of devices including TVs and smartphones. And, with the cost per bit with mmWave spectrum a small fraction of that for LTE with its more expensive frequencies and lower spectral efficiencies it will be possible to dimension network capacity and price services in 5G at levels that make it unnecessary also to have a fixed connection.

Many fixed connections will persist

However; fixed connections, including fixed wireless as well as wireline and fiber, will not go away in most households for several reasons. Whereas virtually everyone has a smartphone nowadays, most houses in developed nations retain a landline to maintain a continuous connection. A fixed connection will continue to be required for the TVs, some of the computing devices without cellular connections and other connected devices.

The home increasingly needs to be connected even when nobody is at home. This could all be done with cellular. However, at mmWave frequencies and even in the 3GHz-6GHz range it could be very difficult and costly to deploy in-home 5G mobile coverage because in-building penetration is poor at high frequencies. An alternative is fixed wireless access with 5G beamed to rooftop or wall-mounted antennas with in-building connectivity provided by WiFi, or other wireless or wired technologies. Depending on various factors such as housing density, line-of-sight restrictions such as with foliage, and spectrum costs this could be an economical alternative to connecting homes directly with wires or fiber. Extensive technical trials by Verizon and AT&T among others, together with some economic modeling, is helping determine under which conditions 5G will enable us to truly cut the cord for everything.