T-Mobile US is about half-way to reaching an internally derived capacity limit for its 5G-based fixed-wireless access (FWA) service but is looking at ways to cost-effectively increase that upper limit so it can continue to expand the service.

CEO Mike Sievert said the carrier added 509,000 FWA connections to its High-Speed Internet (HSI) service during its most recent second quarter, pushing the carrier’s total FWA connection base to 3.7 million. That puts the carrier at the mid-point of the 7 million to 8 million FWA connections it said it can support “based on the excess capacity profile of our built mobile network.”

“That means it’s not capital burdened,” Sievert said. “And because of that, we can make profit there. And so it plays a role. It’s a single-digit penetration role, and we’re on our way to going and seizing it for the benefit of our shareholders and our customers.”

Sievert noted that T-Mobile has extra capacity on its 5G network to support FWA services covering about 50 million addresses. This is based on the carrier’s internally network capacity modeling.

“They're geographically dispersed all over the U.S. because the way our model works is we're selling excess capacity sector by sector,” Sievert said. “What we do is study every sector from every tower in our network and determine what amount of normative smartphone usage will there be over the next several years. And in areas where there's still excess capacity, we today approve applicants for home internet use.”

The dynamic nature of this model means that an address that is “approved” for FWA service one day might have a neighboring address denied service the next day. This model limits ultimate growth to single-digit penetration in those markets but limits the carrier’s financial exposure.

“Since it's not burdened by capital with an already built mobile network that you need for great coverage and competitiveness, we're able to profitably build this business at very low prices,” Sievert said. “It's just a win-win for a sort of single-digit penetration part of the market.”

T-Mobile getting creative to support FWA growth

Sievert also said the carrier is looking for ways to bolster FWA support without incurring additional capex. He noted the carrier was looking at different spectrum models that could tap into its millimeter-wave (mmWave) and mid-band spectrum to power a “nonstandard-based solution” or multi-dwelling unit (MDU) strategies.

Ulf Ewaldsson, president of technology at T-Mobile, said the carrier has deployed its mmWave spectrum in some markets, citing specifically Manhattan and Los Angeles, “where we really have that extraordinary capacity need.” He added that while the carrier is more focused on a macro-spectrum strategy based on its mid-band and low-band assets, “millimeter-wave could also be potentially an interesting play for us when it comes to enhancing capacities that could be used, for example, for HSI.”

“And we are working with our vendors, and we are working through our OEMs to figure out if we can make a viable economic and technical performance case out of that with them,” Ewaldsson added.

The MDU push echoed a recent trial completed by Verizon that tapped its vast mmWave spectrum holdings, owned fiber assets and Intelligent Edge network architecture to power broadband services for MDUs. It used a “simplified broadband network gateway” instead of Verizon’s 4G LTE and 5G wireless cores to direct the traffic over Verizon’s public IP network to the internet, which “means the data traffic will not add load on Verizon’s current wireless cores while at the same time providing excellent capacity and latency.”

“All these things are things we're doing to try to learn,” Sievert said of T-Mobile’s efforts. “And the good news is we've got some time before we'll hit this kind of initial terminal sizing of HSI, still we've got two more years to run. So our heads are down seeing if there's a way to crack the code on this.”

If cracked, T-Mobile could look for greater penetration of the lucrative enterprise market. Callie Field, president of T-Mobile’s Business Group, said she has started to see FWA traction from verticals like retail, health care, education and the federal government.

AT&T CEO John Stankey noted a similar FWA enterprise traction trend, which he added would also allow the carrier to trim costs from other parts of its business.

“I like the product of the business segment and we’re certainly having some success with that,” Stankey said during the carrier’s earnings call this week. “It’s going to be key for us in certain parts of our consumer segment as we move through the next phase of our cost-reduction efforts. It is a means for us to begin finding a good catch to shut down other infrastructure and still serve customers. We will use it surgically and selectively — that will help us both on the cost side as well as [for] retaining valuable customers. [We’re looking for] where we think we can have the right kind of network capacity that will support the product going forward.”

Private networks remain murky

Sievert was less enthusiastic about T-Mobile’s private 5G network progress, responding to a question about the potential of that market: “We don’t really know.” The carrier’s work in this space has been centered on its 5G Advanced Network Services business that it unveiled early last year.

“We don’t know when it will be bigger than a breadbasket, but we do know that we're best-positioned to capture it,” Sievert said, adding that the carrier has so far not factored “a lot of revenues in or really any at all from some of these advanced 5G network services. … But when it becomes something [that] really contributes, we don't really know. And because we didn't know, we made you no promises in our long-range plan on it. But as that market develops, we are beautifully positioned to capture it.”

A recent report from SNS Telecom & IT predicts spending on private network infrastructure will grow at an 18% compound annual growth rate (CAGR) between 2023 and 2026, hitting more than $6.4 billion in total spend by the end of that timeline.

Flat capex could be good for vendors

Those cost considerations have T-Mobile maintaining plans for between $9.5 billion and $9.7 billion in total capex for 2023, with CFO Peter Osvaldik noting that “to taper in Q3 and then further in Q4.” He added that while the carrier has not yet formalized capex guidance for next year, “$9 billion to $10 billion feels about right for the next year at this point in time.”

While that total amount is significantly less than rivals Verizon and AT&T, both of which also invest heavily in their wireline assets, the flat year-over-year nature of that investment could be seen as a win for the vendor community.

Nokia and Ericsson, which are the largest equipment vendors for the U.S. market, have seen regional revenues plunge due to U.S. operators cutting capex following their initial 5G deployments. Despite both Verizon and AT&T claiming significant capex cuts in 2024, both vendors have attempted to use logic to temper those concerns.

“If simply the data traffic continues to grow, operators — if they want to stay in the business — will have to continue to invest,” Nokia CEO Pekka Lundmark said during the vendor’s latest earnings call. “And this is the reason why we believe that this slowdown in investments in some parts of the world, especially in North America, has to be primarily a question of timing because if one particular operator would not continue to invest, their competitors would.”