Fiber broadband is bringing consumers gigabit internet speeds to their home, and in the coming years, 5 gigabit to 10 gigabit speeds, making it a formidable competitor to cable broadband. In part two of this two-part fiber series, we provide an overview of consumer-facing fiber, which is also known as fiber-based broadband connectivity.
Firstly, we analyze the two most common ways in which fiber is deployed to the home. Secondly, we rank the top 10 U.S. broadband providers by number of subscribers. Finally, we explain why the cable companies currently dominate coverage of U.S. homes with broadband internet services.
Fiber – Connects Digital Infrastructure
Fiber optic cables consist of bundled glass strands that transfer data signals into optical light. Specifically, optical equipment is used to transform these data signals into light. The light then travels along fiber threads and is re-converted, at the other end of the fiber strand. Indeed, fiber broadband is the “glue” that connects your home computer to the internet.
Fiber – Categorizations by End User
Fiber is a part of digital infrastructure that has numerous applications. Indeed, there are two overall categories to group fiber into, in order to help differentiate its various business models. Specifically, i) Business-to-Business (B2B) Fiber and ii) Business-to-Consumer (B2C) Fiber.
(1) Business-to-Business (B2B) Fiber
Business-to-business fiber deployments have two sub-categories i) dark fiber and ii) enterprise fiber.
Dark Fiber (or Wholesale Fiber)
Dark fiber is typically procured via a long-term lease, which requires a recurring payment, on a term between 10 years and 25 years. Additionally, dark fiber leases can take the form of an Indefeasible Right of Use (IRU), which is a one-time payment, for a contract extending up to 35 years and even 50 years.
Enterprise Fiber (or Lit Fiber)
Enterprise fiber typically includes four products: Wavelength, Ethernet, IP (Internet Protocol), and SONET (Synchronous Optical Networking).
(2) Business-to-Consumer (B2C) Fiber / Broadband
Business-to-consumer fiber deployments have two sub-categories i) Fiber-to-the-Node and ii) Fiber-to-the-Home.
AT&T and Lumen Technologies are examples of companies that have the largest Fiber-to-the-Node (FTTN) deployments.
Verizon Fios is an example of one of the largest Fiber-to-the-Home (FTTH) deployments.
In part two of this two-part series, we focus on Business-to-Consumer (B2C) Fiber. Indeed, we discuss Business-to-Business (B2B) Fiber in detail, in our prior article here.
Fiber-to-the-Node (FTTN) – Overview
Fiber-to-the-Node (FTTN) networks are designed so that fiber is terminated in a street cabinet or pole at the edge of a neighborhood. Indeed, the final connection to the customer’s home uses existing copper telephone line infrastructure. Specifically, DSL (Digital Subscriber Line) technology facilitates the connection between the neighborhood cabinet and the consumer.
The geographic area served by the node is typically less than a one-mile radius. Specifically, the node may connect up to several hundred customer homes.
The drawback of Fiber-to-the-Node (FTTN) networks are the limitations of the copper telephone lines. Indeed, copper telephone lines reduce the speed and capacity of the network. Specifically, the loss of network quality depends on the distance the signal must travel over copper, instead of fiber.
Telecom providers use Fiber-to-the-Node (FTTN) networks to increase capacity for their customers by pushing fiber closer to the customer’s home. However, telecom providers do not extend fiber all the way to the home, as is the case in a Fiber-to-the-Home (FTTH) build. Indeed, Fiber-to-the-Node (FTTN) is a quicker and cheaper deployment method for telecom providers to upgrade their connectivity. Although Fiber-to-the-Node (FTTN) is cheaper for the telecom provider, it is inferior for the consumer.
Fiber-to-the-Node (FTTN) – Network Architecture
Below is an overview of the key components of the Fiber-to-the-Node (FTTN) network architecture. Specifically, the headend, hub, node, and amplifier are outlined to help distinguish how Fiber-to-the-Node (FTTN) differs from Fiber-to-the-Home (FTTH).
The headend is a facility that is permanent and secure, which holds the electronics to provide cable services in a particular market. Indeed, the headend represents the aggregation point for broadcast video, satellite transmission, and the internet, in that specific market. The headend is ideally located near an Internet Exchange Point (IXP) and a power grid.
As shown above, electronics are moving to the hubs and nodes of the network. In turn, this opens up space at the headend and allows it to be cloud-ready.
The hub is a smaller shelter, connected with fiber, located in the local community. Specifically, each hub serves 50 nodes from different communities. As shown above, electronics are moving to the nodes of the network. In turn, this opens up space at the hub and allows it to be cloud-ready.
The node is a small box, often installed along power lines, which serves a local neighborhood. Indeed, the node is the border between coaxial cable (i.e., copper) and fiber.
Each node can serve several hundred customer homes. Nodes are being equipped with additional electronics to provide more capabilities. In turn, the nodes help to open up space in the headend and hub.
The amplifier is located between the node and the home, and is used to increase the strength of the legacy signal that travels over copper.
Fiber-to-the-Home (FTTH) – Overview
Below is an overview of the key components of the Fiber-to-the-Home (FTTH) network architecture. Specifically, the headend, hub, node, and amplifier are outlined to help distinguish how Fiber-to-the-Home (FTTH) differs from Fiber-to-the-Node (FTTN).
In Fiber-to-the-Home (FTTH) networks, fiber is installed all the way to the home of the customer. Indeed, fiber typically connects to a box on the outside wall of a home. In contrast, Fiber-to-the-Node (FTTN) networks terminate the fiber at the neighborhood cabinet. Therefore, optical nodes for Fiber-to-the-Home (FTTH) networks have fiber connectivity, reducing the need for traditional amplifiers (#4 in the FTTN diagram).
Given the proximity of fiber to the customer and better connection, Fiber-to-the-Home (FTTH) networks offer the fastest speeds. However, the drawback of Fiber-to-the-Home (FTTH) networks is that they come at a higher cost to deploy for the telecom provider. Indeed, Fiber-to-the-Home (FTTH) speeds range from 100 megabits per second to 1 gigabit per second.
Fiber-to-the-Home (FTTH) presents the greatest competition to cable broadband services, which use hybrid fiber-coaxial (HFC) networks. However, given the significant cost to deploy a dense Fiber-to-the-Home (FTTH) build-out, the scale of these services has limitations. Indeed, only ~1/3rd of total United States homes are economically viable for telecom providers to build Fiber-to-the-Home (FTTH) networks.
Broadband Subscribers by Platform
Overall, United States consumers receive cable- and fiber-based broadband internet to their homes from three main types of providers: i) cable, ii) telecom, and iii) satellite. Indeed, the United States has 112 million broadband subscribers in total, which receive broadband from one of these three types of service providers.
- Cable has 76.3 million subscribers, equating to a 68% market share
- Telecom has 33.2 million subscribers, equating to a 30% market share
- Satellite has 2.2 million subscribers, equating to a 2% market share
Over the past years, cable has been taking subscriber share from telecom companies. Indeed, this is part of the reason why telecom company’s subscriber numbers are actually declining year-over-year. Whereas cable companies are growing their subscriber base at 6% to 7% per year.
Additionally, satellite broadband services are improving, with LEO-based constellations like Starlink. However, satellite connectivity, including Starlink, has a focus on rural, or semi-rural areas, which are the places that do not have connectivity currently. Therefore, satellite broadband internet’s total addressable market of homes is much smaller than cable and telecom (including fiber) companies.
Top 10 Cable and Telco (including Fiber) Broadband Providers for Homes
Below are the ten largest broadband providers in the United States, ranked by number of subscribers. Additionally, each broadband provider’s fiber home passings are highlighted, where available.
Comcast has 30.1 million subscribers, under the brand Xfinity.
Charter has 28.6 million subscribers, under the brand Spectrum.
AT&T has 15.4 million subscribers, under its flagship AT&T brand. Importantly, AT&T passes 14 million homes with fiber.
Verizon has 7.1 million subscribers, under the brand Fios. Importantly, Verizon passes 18.5 million homes with fiber.
Cox has 6.1 million subscribers, under its flagship Cox brand.
Lumen has 5.1 million subscribers, under the brand CenturyLink. Importantly, Lumen passes 2.3 million homes with fiber.
Frontier has 3.2 million subscribers, under its flagship Frontier brand. Importantly, Frontier passes 3.0 million homes with fiber.
Mediacom has 1.4 million subscribers, under the brand Xtream.
Windstream has 1.1 million subscribers, under the brand Kinetic. Importantly, Windstream passes 200k homes with fiber and plans to connect millions of homes with fiber broadband internet over the coming years.
Why Does Cable Dominate U.S. Homes in Broadband Internet?
Cable companies use hybrid fiber-coaxial (HFC) networks to deploy their broadband services. Indeed, cable has the ability to serve ~90% of the 126 million American households, with speeds of at least 100 megabits per second. Additionally, cable companies offer speeds of 1 gigabit per second service to most households. In turn, cable has been able to amass 76.3 million subscribers, equating to a significant 68% market share of the U.S. broadband market.
Telecom Companies Offer Comparable Service to Cable in Only 1/3rd of Households
Broadly, telecom companies can have their services classified into three tiers, in order to compare them with cable’s broadband offering.
Firstly, the top-third of U.S. homes are fully competitive with cable’s broadband offering. Indeed, ~40 million homes have a fiber-based broadband internet option from telecom providers, which is an identical service to cable.
Secondly, the middle-third of U.S. homes have a value-alternative to cable. Indeed, this option offers speeds of 50 megabits per second to 100 megabits per second.
Finally, the bottom-third of U.S. homes is effectively a cable monopoly, as the telecom providers offer speeds of <20 to 50 megabits per second. Additionally, 5% to 10% of homes in the United States have no cable broadband internet option and weak telecom-based services.
Overall, cable has a cost-effective way to deliver comparable broadband services, in the form of speeds, to both consumers and businesses. Indeed, because of this, cable companies are taking a significant number of broadband subscribers from telecom provider’s lower speed Digital Subscriber Line (DSL) offerings.
In order for telecom providers to remain competitive, fiber broadband internet needs to be built-out to additional homes by companies like AT&T, Verizon, Lumen, and Frontier, amongst others.
More In-Depth Analysis on Fiber and Cable Broadband Internet to the Home
Dgtl Infra has written extensively on specific companies and their unique strategies both in the fiber-to-the-home and cable broadband sectors. Indeed, a relevant fiber-to-the-home example includes Searchlight Capital’s $425m investment into Consolidated Communications. Specifically, this article discusses the economics of a discrete fiber-to-the-home build-out.
Additionally, cable companies, like Charter Communications, participated aggressively in the Federal Communications Commission’s Rural Digital Opportunity Fund (RDOF) Phase I Auction. Specifically, Charter Communications will receive support of $1.2bn in 1.1m locations, equating to $1,156 of support per location. Indeed, the RDOF support will help Charter Communications continue to grow its broadband presence by passing millions of new homes in the coming years.