#4 – FWA will grow beyond the US, Europe can actually do more with it!

Nowadays, it is widely agreed upon that eMBB will be the main driving use case in the first years of 5G roll-outs, but most operators have come to acknowledge that the likelihood of new revenues from it is quite low. Also, a good amount of industry attention remains on additional incomes from 5G-era IoT. Northstream, however, believes that in 2019 many operators will recognize that it is actually FWA which, also in Europe, has a good potential to generate sizeable new revenues in the first few years of 5G.


Fixed Wireless Access (FWA) has evolved into a separate 5G use case, driven most prominently by Verizon in the US. Northstream believes that, out of all the touted 5G use cases (the others being eMBB, mIoT and URLLC), it is FWA that can be expected to provide the most tangible revenue growth opportunity for many mobile operators in the coming five years – and this not only in the US, but also in certain European markets.

We think that 5G-era FWA does present an incremental revenue opportunity to MNOs. It can be used to compete with fixed broadband providers in urban areas, bring FTTH-like speeds to areas “stuck on” xDSL and in which it may be too costly to build out the last mile with fiber, or to connect households with so far only limited access to any kind of fixed broadband. While earlier (e.g., LTE- and WiMAX-based) FWA has not seen major success, 5G-era solutions will offer substantially increased end-user speeds and can thus become more attractive. Verizon has determined the market potential for its 28 GHz FWA solution to be at 30 million US households, which could presumably be covered by 2023. At Verizon’s current pricing of monthly USD 50-70 per home, the revenue potential equates to USD 18-25 bn annually, or 14-20% of Verizon’s 2017 gross revenues. This is, of course, quite an optimistic case applied to a high-ARPU market. Our own, more cautious estimates suggest that Verizon could achieve 7-10% of current revenues with 5G FWA – still good numbers for potential incremental 5G revenues.

What about Europe then? Naturally, FWA attractiveness depends on the FTTB/FTTH penetration rates in a country, and mmWave deployments will be heavily limited by the tighter CAPEX budgets of European MNOs. In Europe, though, mid-band spectrum is much more available than in the US, which would indeed enable a larger-scale roll-out in countries in which there is a lack of sufficient fixed broadband access in suburban areas and even villages with a meaningful core town center. Additionally, FWA on mmWave bands – which also exist in Europe (see, e.g., the recent auction in Italy) – can selectively be set up to offer FTTH-like speeds in urban settings with a high fixed broadband ARPU. With 5G-era FWA, European MNOs could compete with existing FTTx/ADSL/VDSL/Cable offerings of fixed broadband providers, or, in case of converged operators, upsell existing customers to higher speeds. European markets in which 5G FWA is currently being investigated include Switzerland, where Swisscom has conducted trials on the 3.5 GHz band for remote mountain villages; and Germany, where Telefónica is running tests in Hamburg on the 26 GHz band.

In sum, when it comes to additional revenues in 5G for (certain) mobile operators, Northstream believes that it is FWA which will become the sizeable opportunity in the short- to mid-term. 5G FWA technology and demand will be there already in 2019, with spectrum, 3GPP-based equipment and end-user devices becoming available. Especially Verizon’s strong push for FWA is expected to boost the development of the ecosystem. Furthermore, operators will be able to leverage both their existing physical assets (e.g., network grid, IT systems) and competencies quickly and significantly in FWA. Therefore, it is our view that FWA in 2019 will be recognized as a mainstream 5G revenue opportunity beyond the US, and particularly in Europe.

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#5 - A new category of operator owners arise with focus on sustainable cash generation rather than revenue growth

It has taken half a decade to get here, but with Europe on the doorstep of the next generation of mobile communications, we believe regulators’ arguments for sustaining four-player mobile markets in the interest of consumers have finally become too weak. Consolidation is a must in order to create sustainable operators with capital available to [...]
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