Broadband Growth Slowing After COVID-19-Driven Surge: Parks

After “massive growth" in adoption of residential internet during the COVID-19 pandemic, U.S. broadband growth slowed in 2022 as the “low-hanging fruit has already been picked,” said Parks Associates analyst Kristen Hanich on a Connections webcast last week. Broadband penetration increased 5 percentage points -- 12 million homes -- since 2019, when pandemic-driven shifts required workers and students to work from home.

Fixed home adoption of internet in U.S. households grew from 75% in 2019 to 80% this year, she said. “People realized the internet was vitally important to them” to support streaming video for productivity and entertainment, the growing number of connected devices in their homes and to be informed, Hanich said. The percentage of Americans that were “local only” during the pandemic decreased, and households that weren’t connected to the internet “became connected,” said the analyst.

Hanich cited a rise in competition in the broadband provider market from new entrants, including 5G home internet from Verizon and T-Mobile, and new fiber providers including electric utilities and small local players. New entrants also include providers backed by investor groups including Brightspeed, which plans to expand in states including Kansas, South Carolina, Arkansas, Pennsylvania, Missouri, Louisiana, Ohio, Alabama, Texas, Virginia and North Carolina (see 2207270011) over the next few years.

The emergence of new players put pressure on the market's low and high ends, Hanich said, and fewer household moves resulted in a slowdown in new subscriber additions. While 2022 has been “more of a challenging environment" than previous years, the outlook is “highly positive for broadband providers,” she said, because consumers learned during the pandemic “how important home internet is to their lives.”

At the start of the pandemic, consumers had an average of 11.4 connected devices, which grew to an average of 15.7 this year. That includes more connected health devices, joining computers, mobile devices, smart speakers and smart TVs. In addition, the typical broadband home owns an average of three smart home products, she said.

Remote work, particularly, is an outgrowth of the pandemic that appears to be here to stay, Hanich said. Full-time remote work is down year on year, but hybrid remote work is above where it was at the height of the pandemic, Hanich said. As of Q3, 41% of U.S. households were working remotely, at least on a hybrid basis, she said.

Hybrid working households, which tend to be higher earners, are attractive tenants to multidwelling unit owners, which are using high-speed and reliable broadband as lures for desirable tenants, Hanich said. More advanced features enabled by broadband include property-wide internet that allows tenants to be productive from various locations in the community. Hanich described being able to work poolside at an MDU “and printing a document straight to the printer in your own unit, using your own home network.”

MDUs are also increasing adoption of smart home technology, due to broadband connectivity, Hanich said. On the residential side, smart home technology provides MDU management return on investment via amenity fees, the ability to attract and retain residents and a point of differentiation from competitors, she said.

MDUs are also adopting smart home technology for internal use, Hanich said. Amid the labor shortage, MDUs have turned to smart home tech to improve their operational efficiency and safety features. Hanich noted an increase in deployment of connected cameras, door locks and access control, while smart parking helps MDU owners enforce assigned parking and leverage underused space. MDUs also use smart technology for energy management, leak-sensing and to enable self-guided tours to free up staff, she noted.

Newer MDUs are built with broadband connectivity in mind, but networks in older buildings weren’t designed for such a heavy workload, Hanich noted. They face logistical challenges such as high interference levels from residents' Wi-Fi networks and dead spots from building materials including wire mesh and concrete. That can determine whether a building will have wired broadband connectivity or Wi-Fi, she said.