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There are high hopes for fiber broadband in 2024 and beyond
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But fiber has a history of punishing big companies
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Verizon’s early foray with FiOS comes to mind
First quarter 2024 earnings are right around the corner, and Fierce Network will be monitoring the reports of public fiber vendors and operators. But before we look forward, let’s look in the rear-view mirror.
About 20 years ago, Verizon and AT&T went on a fiber-deploying spree that didn’t immediately turn out so well. The analysts at Wolfe Research, led by Peter Supino, wrote this week that those early fiber-to-the-home (FTTH) deployments ended with disappointing financial results. The problems stemmed from low internet service prices, less efficient technologies, union labor and lower bandwidth demand.
“Strikingly, in 2015 AT&T agreed to expand FTTH to 14 million new locations as a concession to the FCC so that AT&T could buy DirecTV!” wrote Wolfe Research. “Today those FTTH locations are worth more than DirecTV itself. What happened? Fiber became profitable to build because streaming plus connected device proliferation drove demand for premium service while cable's aggressive pricing of its broadband leadership enabled higher fiber pricing.”
Wolfe’s comments illustrate what a roller coaster ride fiber deployments have been.
Blast from the past
Verizon was the first company to really stick its neck out by building fiber via its FiOS project. By 2006, Verizon offered FiOS in parts of seven states. But in 2010, Verizon pulled the plug on FiOS expansions due to its high cost and low return on investment.
And even deep-pocketed Google hasn’t been immune. Remember in 2011 when Google conducted a nationwide contest to determine which city would be the first to receive Google Fiber? Kansas City won that contest, after which Google also deployed fiber in several other cities. But in 2016 Google Fiber lost its appetite for the expensive deployments and put all expansions on hold. It wasn’t until 2022 that Google Fiber (now called GFiber) resumed expansions to new markets.
Even though things have been much brighter for fiber lately because of the prospect of billions of dollars that will be flowing from the Broadband Equity, Access and Deployment (BEAD) program, things can still be rocky for those in the fiber ecosystem.
For instance, fiber vendors had a difficult 2023. The general consensus was that operators had stockpiled too much fiber gear during Covid, and last year they worked down those inventories, leaving vendors in a bad place.
Dell’Oro analyst Jeff Heynen told Fierce Network that for 2024, “Many of the larger operators still have excess inventory to work through, which means sales of new fiber, conduit, ODN infrastructure, OLTs, and ONTs — particularly in the first half of the year — are likely to be quite slow."
That said, he does "expect the spending to ramp back up toward the end of the year, especially if some of the BEAD project funding begins to get disbursed in Louisiana and some of the early states.”
In terms of total fiber passings for 2024, Heynen expects them to be in line with 2023.
Last year, total new passings for the large operators were around 6 million, and there were an additional 3 million new rural passings last year.
For the longer term, things look bright for fiber. The analysts at Wolfe wrote, “We see opportunity for fiber subs to double from about 22 million today to about 45 million, with fiber-to-the-home infrastructure covering 65-80% of U.S. households by 2033 up from 45% currently."
Wolfe added that 46 million suburban, small market and rural homes present the largest opportunity, and many of these can be passed for less than $1,500 per home.
Follow along with all of our fiber-specific broadband coverage right here.