June greetings from Kansas City, a site for this month’s Group Stage qualifying rounds for the World Cup. Event organizers expect as many as 650,000 visitors to the City of Fountains over the next six weeks, so if you have a business trip planned to Kansas City in late June or early July, you might want to check for room availability. More on the activities planned for the area here – Arrowhead Stadium will play host to each match.
Before we begin our 2Q earnings preview (the subject of the June 21st and July 19th Briefs), we thought that a concise analysis of competing broadband technologies (fiber, hybrid fiber coax, fixed wireless, and satellite) would be beneficial. There has been much conjecture about the impact of technological alternatives on company valuations, and we think some historical perspective might assist the discussion.
Many long-time Brief readers recognize today’s title from previous Briefs (here from August 2019 and here from July 2020). It’s important to note that both columns were written prior to any Big 3 wireless broadband offerings. The themes expressed in those two columns (and in the supporting articles) are two-fold: a) focus is required – fiber deployment is not a side hustle, and b) the best fiber deployments cover entire zip codes and are costly. These theses are updated below.
Schedule updates: We will be attending the INDATEL Business Symposium from June 22-24 in Austin and look forward to catching up with Brief readers there. We will also be attending the Midwest Peering Summit in Des Moines on July 8.
The Fortnight That Was
The phrase that came to mind after Friday’s selloff was “Stairs Up, Elevator Down.” For those of you who do not track the markets, Friday’s tech selloff (4.2% NASDAQ decline) was the steepest since the aftermath of the Liberation Day tariff announcement last April. No one doubts that it was needed. While dangerous to use one stock as a proxy for the entire market, we think that chip maker Micron Technologies tells the tale well (see nearby stock price chart courtesy of Yahoo! Finance). Even with yesterday’s 13% decline, the stock is up a remarkable 713% over the last twelve months. Stairs up, elevator down.
As the above links to the Briefs from 2019 and 2020 show, investors need to take a deep breath and consider the current Fab Run in context. In July 2020 (roughly six years ago), this was the chart for the Fab Five and Telco Top Five:
Alphabet started 2020 with a $923 billion valuation. Since then, even with COVID, tariff concerns, geopolitical developments, and Friday’s drop, the Mountain View mammoth has returned 30+% each year for the last 5.5 years! That’s somewhere between private equity and venture capital-ish levels. Apple (26% annual returns for the last 5.5 years) Amazon (+21%), Meta (19%) and Microsoft (19%) have performed exceptionally well.
Meanwhile, since the beginning of 2020, the telecom industry (except for T-Mobile) has been struggling or in outright freefall. Magenta started 2020 with a $67 billion valuation and handwringing over Sprint merger approvals. Thanks to strong management and an Uncarrier culture, the stock has returned 21% per year (compounded) over the last 5.5 years. Their recent dividends and some share buybacks sweeten that shareholder pot a little more. Here’s a conversation starter for your next cocktail party, courtesy of The Sunday Brief: Since the beginning of 2020, T-Mobile has been a better investment than Meta or Microsoft and returned similar returns to their Seattle cousin Amazon.
Unfortunately, that’s been the only positive story in telecom using the 2020-2026 period. Comcast started 2020 with a $203 billion valuation and now is worth $87 billion (even with the Versant spin and a small dividend, the value destruction is amazing). Charter started 2020 with a $104 billion valuation – that is now below $20 billion. Even with the recent M&A-fueled surge in Warner Brothers Discovery, AT&T has lost just over $100 billion, and Verizon is down from $252 billion to $189 billion in market capitalization. The only return component to long-term Verizon and AT&T investors has been dividends.
Friday’s losses were sudden but are common in bull markets. The value created by the Fab Five since the beginning of 2020 has been nothing short of astounding ($11.3 trillion by our math). And they continue to invest heavily in infrastructure while generating double-digit annual returns.
Next week, we will hear a lot about Elon Musk’s SpaceX, one of the finest displays of entrepreneurship in the last hundred years. For those of you who have been living under a rock, SpaceX will go public starting this Friday at a valuation of $1.7 to $2.2 trillion dollars. Thirty percent of the IPO will be allocated to retail investors. The company will be raising $75 billion to fund capital investments for both Xai and SpaceX. Below are historical tables from the S-1 outlining their cash flow and capital spending data:
While these numbers appear to be large in total, SpaceX AI spending is small compared to infrastructure investments we have chronicled in previous editions of the Brief. Even for connectivity ($10.1 billion over the last three years), the capital deployed per active customer (10.3 million per the S-1) is a relatively small $984 (roughly an iPhone subsidy).
The running theme that markets will “strain” to fund $75 billion in IPO (with $22 billion of that coming from individual investors) is laughable. SpaceX shows that rocket science is more than just a hobby – it’s an investment that can make many folks (especially Echostar) rich. It’s scheduled to go public at ~ $135 per share. We would not be surprised to see it well above $170 per share by our next Brief (first week of trading). That would value the company in the low $2 trillions and generate a wealth boom in Texas and California (for more on how many new millionaires and billionaires this will create, this article from The Wall Street Journal is an excellent read).
Finally, Tim Cook’s last opportunity to present at Apple’s Worldwide Developer Conference (WWDC) is next week. There are many thoughts on his tenure at Apple, but the most important is that Tim Cook made Steve Jobs’ vision a reality for billions of people across the globe. Whether you are a multi-decade fan of Apple’s products, an investor in AAPL, or simply an industry bystander, Apple has dramatically changed under Tim Cook’s tenure as COO (2005-2011) and CEO (2011-2026). Without Tim, the universality of Apple products and services (and the applications that run on them) would still be a goal (vs a reality). He made this difficult task look easy. For more on what will be announced at WWDC 2026, this article by Mark Gurman at Bloomberg is an excellent read).
Fiber Always Wins (until it doesn’t) – 2026 Edition
For many of us, it’s hard to imagine a time prior to home fiber. We had Spectrum Fiber installed at our current home in the Kansas City area in 2022. Prior to that, choices were limited to AT&T DSL and DirecTV. T-Mobile Home Internet was just coming online, and coverage was spotty.
That changed dramatically over the last four years. A week does not go by without a mailer from GFiber touting 8 Gbps service to our home. Robust fixed wireless options exist from each of the Big 3 carriers. Spectrum Fiber has been relatively stable with outages driven by vandalism (more on that here). Without consistent connectivity, we probably would have moved.
This is not an uncommon story across America as tens of millions of homes have experienced fiber services for the first time. Many of them had cable’s hybrid fiber coax (HFC) broadband service prior to fiber, and, from the recent data, few have returned to their previous provider. There are approximately 18 million fixed wireless subscribers from T-Mobile, Verizon and AT&T.
According to the latest data from the Fiber Broadband Association (see nearby chart and article here), there are 84.6 million unique homes passed with fiber and just over 39 million connections (some homes have more than one passing, e.g., a barn or other secondary structure, and we will use the 98.4 million figure in our analysis). Around 16% of all homes have a choice of two or more fiber providers for home broadband.
There are approximately 150 million total homes passed in the US, with 90% of these (134 million homes) serving as primary residences. This means that as of September 2025, approximately 26% of all homes have fiber as their primary broadband connectivity source and 18 million or 13% use fixed wireless. This still leaves a lot of penetration for HFC, with our estimate at 48%. Said differently, cable HFC is still about the same size as their two largest technological competitors. The remaining 13% are divided between DSL (being converted to fiber), fixed wireless (e.g., Nextlink) and satellite.
All the above figures are approximate and will change by the end of next year. Here are the dynamics we see in the home broadband industry:
- Over 70% of homes passed (107 million) will have multiple multi-Gbps options (excess bandwidth condition) by the end of 2027. Over 45% of these homes (48 million) will have fiber as their primary connection with 55-60% of that coming from AT&T and Verizon). This represents a 6% market share gain for fiber over the next two years in a head-to-head matchup. Despite opinions to the contrary, we do not see these homes as targets for Starlink as a primary service option (see note below).
- That leaves around 40 million homes passed with 28-32 million of those being primary residences. Of these homes, one third will have cable or fiber as a primary option and no other alternative (e.g., fiber may exist from an electric cooperative where cable plant does not exist) and another third (roughly 12 million homes) will continue to have DSL or satellite as their primary option as BEAD and other broadband funds are deployed.
If these predictions are true, HFC-powered households will be down 10-15% from today’s estimated 72 million (55% of the 107 million homes will have HFC = 58-59 million + another 4-5 million from the second category = 62-64 million households on HFC). Absent a price war, we do not see many migrations from fiber to cable in the next two years. It will still be a 55 to 45% win for HFC in a multi-gigabit head-to-head matchup, but a far cry from their dominance of the previous 15-20 years.
We are in the minority here, but we do not believe that MVNO deployment is the best strategy for smaller FTTH providers. We think that the following services provide more value to FTTH customers:
- Failover/ backup solutions. This includes Uninterruptable Power Supply, Portable Power Solution, and wireless backup solutions. Having a preferred home solution for $19.99/ month and a small upfront is an all-around winner.
- Artificial Intelligence solutions. Smaller FTTH providers who establish relationships to bring the benefits of AI to the home will be rewarded. Reducing latency in each response, offering local workshops to consumers and small businesses on the benefits of AI and discounts (or higher amounts of tokens) on premium packages are three small but meaningful winning solutions for customer retention and growth.
- Service-included solutions. Smaller FTTH providers who distinguish themselves on service/ knowledge will have meaningfully lower churn and higher customer lifetime values. These check-up in-home visits can be periodic (annual) and event-driven (new in-home electronics). Home security, energy efficiency and outdoor Wi-Fi 7 can drive a lot of time-consuming research unless you “have a person.” That void will not be needed for everyone, but those who can fill it with friendly, fast and knowledgeable people/ agents will have a leg up on their competitors.
We have documented many examples over the last 15 years where fiber has fallen flat – poor transition, poor architecture, poor construction methods and high prices/ flat competitive responses. Those screwups were common 15 and 20 years ago but are avoided (or fixed faster) today. The fiber installation experience takes time, and many homeowners feel invested after the initial visit. FTTH providers can get closer to the customer (and increase Average Revenue per Home Passed) without bundling wireless or subsidizing streaming services. Those who remain focused on reinvesting into improved speeds/ experiences will reap outsized rewards.
Our next Brief will be over Father’s Day weekend where we will begin our 2Q earnings analysis with a focus on Verizon and T-Mobile. In the meantime, if you have friends who are interested in being notified each time we publish a Brief, please have them sign up at www.sundaybrief.com.
Go Royals and Sporting KC!
Important disclosure: The opinions expressed in The Sunday Brief are those of Jim Patterson and Patterson Advisory Group, LLC, and do not reflect those of CellSite Solutions, LLC, or Fort Point Capital.
