T-Mobile (NASDAQ: TMUS) hopes to leverage its considerable lead in building out its 5G network to convince millions of households to cut another cord-the ethernet cable.
The company just launched its very own wireless 5G broadband service. This wireless internet will cost $60 a month and offer max speeds of 100 megabytes per second.
The notion of cord-free internet is nothing new among carriers. Verizon (NYSE: VZ) offers a nearly identical service to T-Mobile, but Verizon's broadband coverage is limited to 12 cities, according to Bloomberg News.
T-Mobile's ability to offer more coverage in more places comes down to its considerable lead in building out its own 5G network. The companies $26.5 billion acquisition of Sprint last year greatly expanded T-Mobile's network in terms of coverage. And the merger gave the company a bevy of mid-band frequencies, which deliver 5G more reliably than higher-end frequencies.
Other carriers are still playing catch-up to T-Mobile.
"Our wireless competitors are not in a great position from a 5G coverage and capacity standpoint to be able to roll out home internet broadly" according to Dow Draper, T-Mobiles Executive VP of emerging products, quoted by Bloomberg. "We think that there's more than enough opportunity for our product, which can handle significant usage."
T-Mobile's many mid-band frequencies, which it gobbled up through its acquisition, will help the company beam broadband service to 7-8 million new households over the next five years.
In fact, T-Mobile leveraged the idea of wireless internet to assuage anti-trust regulators during the Sprint buy-out. The company claimed that it would use its 5G network to bring competition among internet service providers, particularly in rural and underserved areas.
"There remains a viable case for fixed=wireless internet in unserved areas, including rural markets and certain urban areas" GlobalData's (LON: DATA) Tammy Parker told Bloomberg. However, she noted that "5G wireless home internet, in and of itself, is not an existential threat to traditional home broadband services at this time."
And why is that?
Simply put, fiber optic cables deliver faster, more reliable internet. T-Mobile's mid-band frequencies may be able to get through foliage, but they won't be able to provide the 1 Gbps second speeds advertised by many cable providers.
5G networks are also subject to congestion, making them prone to slowdowns when too many people are on the network.
Such limitations have limited the marketability of truly wireless internet for the most part.
Sanford C Bernstein & Co's Peter Supino notes that Verizon's only managed to bring 100,000 subscribers on board over the past two years, an outcome he called "a staggering whiff." The CEO of T-Mobile's other competitor, AT&T (NYSE: T), believes that such a wireless-only internet is far from future proof given escalating data usage among consumers.
So which is it? Do the inherent limitations of its technology ultimately doom T-Mobile's 5G broadband service?
For the time being, T-Mobile's wireless internet is "good enough service for a better price," says Supino.