Traditional Internet Providers Face WiFi Networks

Turner Broadcasting logoExperts knew a long time ago that as superfast wireless broadband expanded, wired services from cable companies to telecoms would lose customers, perhaps at a rate that could badly damage them financially. That time has come, and tradition broadband firms have very few options to hold their own.

According to The Wall Street Journal, Leichtman Research Group has issued a study showing that, "Last year around 1% of U.S. households stopped paying for home Internet subscriptions and relied on wireless access instead." The number seems very modest, until the relentless progress of 4G networks and the advance of WiFi systems are taken into account.

The early culprit in the move from wired to wireless is the smartphone. It has been tethered to wireless networks for years. However, these networks were not powerful enough in terms of speed to make much difference to consumers who wanted to use portable devices for data-heavy applications like video. However, the wireless geographic maps of AT&T Inc. (NYSE: T), Verizon Wireless and Sprint Nextel Corp. (NYSE: S) had very little 4G distribution just two years ago. That has changed radically, and so have the smartphones that have improved to run video and download files.

The more radical change for wired companies, which have added tens of millions of subscribers over the decades and then converted many of them to broadband and voice service, is that wireless broadband has become so widely distributed that soon people will be able to put old-style antennas on their roofs and receive signals that can run their televisions and personal computers. That day may be years off, but it is not decades away. Wireless companies have the chance to entirely change the cable and telecom industries' access to homes over broadband networks.

It is difficult to say which companies will win and which will lose as the new technology grows. Likely cable companies will get the worst of it. They are not wedded to broadly distributed wireless networks. These undercut their legacy businesses too much. Telecoms, on the other hand, will be able to drive more and more of their customers to wireless broadband. Their wired broadband presence in the home is based on new fiber networks that have only made modest inroads against cable and satellite delivered products.

It may be that, soon, rows upon rows of homes will sprout antennas, but they will not be to capture local radio signals. They will be part of what business school professors call "creative destruction," as an entire industry is destroyed.

Filed under: 24/7 Wall St. Wire, Internet Tagged: featured, S, T
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