Fully two years before the IMT 2020 “5G” standards are completed, Verizon announced at a “sell side analyst meeting” that it will launch a “5G” fixed wireless broadband service for residential customer Internet access in three to five U.S. markets in the second half of next year (2018). The company plans to use what they claim is “an early version of 5G” for the fixed wireless services. It’s supposedly the same technology that AT&T is testing in several cities.
As I’ve been saying for quite some time, these so called “5G” commercial service offerings are way to premature, because the ITU-R WP5D won’t even complete evaluation of the IMT 2020 Radio Access Network (RAN) technologies by end of 2020!
Verizon’s first commercial launch is planned to be in Sacramento, CA in the second half of 2018. Details of that launch, and the announcement of additional markets, will be provided at a later date, the company said. Verizon plans to commercially deploy this broadband fixed wireless access service to a total of three to five markets in 2018.
Verizon already trialed 5G residential applications in 11 markets in 2017. The commercial launch is based on customer experience and on Verizon’s confidence in new technology powered by mmWave spectrum, the #1 US mobile operator said.
The company sees a potential market of 30 million households in the US for “5G” residential broadband services. The initial launch in 2018 is not expected to require significant capex. Speaking at an investor conference, Verizon said its capex in 2018 would be “consistent with the past several years.” The top U.S. mobile operator previously said that its 2017 capex will be between $16.8 billion and $17.5 billion.
“This is a landmark announcement for customers and investors who have been waiting for the 5G future to become a reality,” said Hans Vestberg, Verizon CTO. “We appreciate our strong ecosystem partners for their passion and technological support in helping us drive forward with 5G industry standards, for both fixed and mobile applications. The targeted initial launches we are announcing today will provide a strong framework for accelerating 5G’s future deployment on the global standards.”
This “5G” fixed wireless broadband access (FWBA) will use the 28 GHz spectrum band. Verizon forecasts the total addressable U.S. market for that technology is approximately 30 million homes. FWBA seems like a great idea as no fiber or wires have to be installed, but it has many challenges. Those include: poor propagation characteristics of millimeter wave spectrum.
A few slides from Verizon’s presentation:
At the investor conference, Verizon said that 25% to 30% of the “residential broadband market” in the US is “addressable by 5G.” Verizon says that could be up to 30 million households. According to the US Census Bureau, in 2016 there were 125.82 million across the US.
In the trials so far, Verizon said that it has served a 19 floor apartment building with the 28GHz millimeter wave (mmWave) 5G connection. The operator has been testing “home units” and “optional outdoor antennas” in the tests. Verizon has also been testing outdoor window-mount antennas that use an optical connection to an indoor WiFi router to distribute the signal.
Verizon is continuing to test its own fixed 5G specification in multiple markets. It will test the 3rd Generation Partnership Project (3GPP) release 15 New Radio (NR) specification in the US in 2018.
–>Note yet again that 3GPP’s NR has not even been presented to ITU-R WP5D nor have any other Radio Interface Technologies (RITs). However, 3GPP has indicated it’s intent to submit NR for consideration late in 2018 when WP 5D will start to evaluate RITs.
Matt Ellis, EVP & CFO, will speak at the UBS 45th Annual Global Media and Communications Conference on December 5th at approximately 8:00 AM ET.
Two years ago, we reported that “Verizon has completed a field trial of NG-PON2 fiber-to-the-premises technology that could provide the infrastructure for download speeds up to 10 Gbps for residential and business customers.”
This past January, Verizon completed its first interoperability trial of NG-PON2 technology at its Verizon Labs location in Waltham, MA. During the trial, Verizon demonstrated that equipment from different vendors on each end of a single fiber—one on the service provider’s endpoint and that the customer premises—can deliver service without any end-user impact.
In an October 16th press release in advance of the Broadband Forum’s Access Summit, Verizon said NG-PON2 represent a paradigm shift in the access space and a more certain path towards long-term success.
“Technologies such as NG-PON2 present exciting new opportunities for vendors, such as delivering residential and business services on multiple wavelengths over the same fiber,” said Vincent O’Byrne, Director of Technology at Verizon.
“Not only does NG-PON2 parse business and residential customer traffic to isolate and resolve potential problems in the network, it can also scale to achieve speeds of 40 Gbps and above,” O’Byrne added.
“Technologies such as NG-PON2 present exciting new opportunities for vendors, such as delivering residential and business services on multiple wavelengths over the same fiber,” said O’Byrne. “Not only does NG-PON2 parse business and residential customer traffic to isolate and resolve potential problems in the network, it can also scale to achieve speeds of 40 Gbps and above.”
At the Broadband Forum’s Access Summit, The Verizon executive will address how the fiber access space is constantly evolving, with emerging PON technology providing solutions to some of the issues around cost and reliability during the Broadband World Forum, at the Messe Berlin on Tuesday, Oct. 24th.
Verizon has been an active participant in driving awareness about how NG-PON2 can work in a real-world carrier environment. The company completed NG-PON2 interoperability with five vendors for its OpenOMCI (ONT Management and Control Interface) spec, bringing it one step closer toward achieving interoperable NG PON systems.
The mega telco plans to offer it’s own OpenOMCI specification , which define the optical line terminal (OLT)-to-optical network terminal (ONT) interface, to the larger telecom industry.
Note 1. OpenOMCI specification was developed and is owned by Verizon, rathr than a formal standards/spec writing body like the ITU-T or Optical Internetworking Forum (OIF). Is this the new way of producing specs (like “5G” used in trials)?
Bernd Hesse, Chair of the Broadband Access Summit and Senior Director Technology Development at Calix, said:
“We will be exploring NG-PON2 in depth and the use cases that underpin the decisions to deploy them. I look forward to the debate, hearing from the experts in the industry and welcoming the community to these new Forum events.”
The Next Generation Mobile Networks Alliance (NGMN), an industry association of mobile carriers, has defined requirements for 5G including data rates, transmission speeds, spectral efficiency and latency.
So has ITU-R WP 5D- the only real standards body for 5G (AKA IMT 2020). However, the wireless networking industry has yet to agree on the Radio Access Network (RAN) and related 5G standards, despite 3GPP release 15 on “New Radio.” 5G standards won’t be completed until very late in 2020.
As we’ve reported in several IEEE techblog posts, AT&T and Verizon are conducting 5G trials in the US while other trials are proceeding in Europe and Asia.
Bullish Opinions on 5G:
Broad deployment of 5G networks is not expected until the 2020 timeframe, according to Sam Lucero, a senior principal analyst for M2M at IoT at IHS Markit. Yet despite the lack of standards, a number of speakers at last month’s Mobile World Congress (MWC) Americas in San Francisco were more bullish on 5G and expectations for its rollout.
“We expect 5G to come faster and be broader than originally thought,” said Rajeev Suri, president and CEO of Nokia. Suri said Nokia expects 5G networks to be deployed in 2019, with widespread trials next year.
“4G is like a really good rock band,” said Andre Feutsch, CTO at AT&T. “5G is like a finely tuned orchestra.” He added that he sees n 5G a tremendous opportunity for advancing and “frankly making the network more relevant.”
“From a network perspective, [5G] is an evolution,” said Gordon Mansfield, vice president of RAN and device design at AT&T. “However, from a capability perspective it will be a revolution as it unfolds.”
“The 4G network is foundational to 5G,” said Nicki Palmer, chief network officer at Verizon. She added, “It’s hard to really peel 4G and 5G apart in some ways. The good news is that the investments we make today [in 4G] lead us down the 5G path.”
“We’ve been trying to define what 5G is for the past five years,” said Ron Marquardt, vice president of technology at Sprint. “We are getting close to being able to define that. We need to educate industries on how 5G can and will disrupt them.”
Feutsch said 5G technology will enable carriers to provide solutions to a greater number of use cases. He said a lot of the work that has been done to date with pre-standards trials of 5G “were really to gain a lot of insights that helped us feed right back into the standards work.”
He added that standardization and openness would be critical to creating the healthy ecosystem that is required to enable 5G to flourish.
“We’ve got to standardize on this and avoid proprietariness as much as possible” to build a healthy 5G ecosystem Feutsch said. He said a lot of innovation for 5G would come from smaller companies — “disruptors” that need to rely on standards to make the technology they are developing fit into the 5G landscape.
Derek Peterson, chief technology officer at Boingo Wireless, a provider of mobile Internet access, also emphasized the importance of standards and urged audience members to participate in standards efforts. “Participating in standards is very important because it is going to take a collaborative effort to make all of these things work together,” he said.
The densification required for 5G transmission speeds will rely on a far greater number of smaller cell sites than previous generations of wireless technology. The process of getting the cell sites approved can vary widely from place to place, and often be one of the biggest roadblocks to 5G.
“It can take a year to get a permit for something that it takes an hour to hang on a pole,” Mansfield said.
“The biggest barrier is going to be the density that you need for 5G is something that we have never seen before,” said John Saw, Sprint’s CTO. “It’s going to be more than putting 5G on the towers that we know and love today. We need to change how we get permits for this.” Saw added.
With the wireless industry prepared to spend an estimated $275 billion to deploy 5G, governments need to streamline permitting processes.
“I think public policy makers get to have a say in how fast we spend it and where we spend it. They need to get used to the fact that there may be hundreds and perhaps thousands of permits being requested to get this density that is required,” Saw concluded.
Panelists in an IoT session said that the primary barriers to enterprise IoT adoption include limited battery capacities and insufficient interoperability between connected devices, including VPN support, cloud service compatibility and other technologies. No mention was made of 5G for low latency IoT applications.
Verizon will forgo using copper-based G.fast (DSL) technology in favor of an all-out move to deploy fiber-to-the-premises (FTTP) to/from multiple-dwelling units (MDUs), according to Vincent O’Byrne, director of network planning for Verizon. Mr O’Byrne spoke August 15th at ADTRAN’s Broadband Solutions Summit in Huntsville, AL.
“Our strategy for G.Fast is not to deploy it,” O’Byrne said at the conference.
“The strategy we’re using today is fiber all the way to the living unit,” O’Byrne said. “There’s some small percentage that we use fiber to the building (FTTP) and then copper inside the building itself, but because we have two vendors on BPON and on GPON meant in those units we had 8 types of different MDU units.”
O’Byrne cited the sketchy nature of the copper network in some places and a history of VDSL2 inter-operability and speed related problems in MDUs.
“The MDU units started to go end of life and for VDSL2 there wasn’t any interoperability,” O’Byrne said. “Even though we worked on it for a year, it became nuisance so we stopped using those common ONTs and concentrated on getting fiber to the living unit.”
Speed is also an issue. “We ended up in a situation where the 13 units of VDSL2 were going end of life as well as lower speed down the surrounding Fios network, which could get up to 1 Gbps,” O’Byrne said. “With G.fast we see ourselves potentially being in the same situation five years from now where we would have to replace the same thing.”
O’Byrne said that bringing fiber directly to each premises is more of a future proof strategy. “It’s a bit more expensive to put the single family unit fiber connections out there, but we have the same kind of service as the rest of the network,” O’Byrne said. “We also found that the trouble report rate is less on the fiber all the way to the living unit.” That’s in sharp contrast to the hybrid fiber-copper technology used by AT&T in its U-Verse triple play bundle (which this author has had for almost 5 years).
Given the diversity and varying condition of copper plant in Verizon’s wider nationwide network, Verizon has applied its copper replacement strategy for the MDU markets.
In recent years, Verizon has been strategically replacing aging copper plant with fiber at its consumer and business locations. The service provider said that this method enables it to reduce costs by not having to perform multiple customer visits when problems arise.
Verizon has been replacing aging copper plant with fiber at its consumer and business locations. Fios to residential triple play customers was the first step, with fiber to commercial buildings and MDUs now well underway.
“At Verizon we were finding the trouble reports on the copper were two to three times more than when we had fiber to the living unit,” O’Byrne said. “For a long time, the copper plant in the Verizon network was not as good as it was in some locations so if we went to G.fast it would be low volume and we would have the same issues five years down the road.”
“We’re skipping XGS-PON single wavelength,” said O’Byrne. “We’re going for a 10G tunable laser solution.”
O’Byrne said driving costs lower and providing a unified architecture that’s inter-operable across multiple equipment vendors are key goals for their strategy. He also mentioned solutions that can maximize use of Verizon’s extensive and somewhat disparate outside wiring plant environment.
Unlimited data boosts Verizon’s phone net additions though wireless margins continue to diminish
by Steve Vachon, TBR Analyst
In 2Q17 Verizon was able to report consolidated year-to-year revenue growth (+0.1%, on a historical, non-adjusted basis) for the first quarter since 1Q16, but this was mainly due to $693 million in revenue generated from acquisitions that have closed in the past year, including Fleetmatics, Telogis and, most recently, Yahoo, which closed on June 13, 2017.
Verizon’s core businesses continue to feel the weight of pricing pressures and market saturation within the mobility, video and business services markets. These trends are exemplified by wireless revenue remaining in decline (-1.9% year-to-year) despite the recent launch of unlimited data, competition from over the top (OTT) preventing Fios video subscriber additions and growth within Verizon’s new Business Markets unit being largely contingent on the XO Communications acquisition.
The launch of Verizon’s unlimited data plans in February boosted postpaid phone net additions, totaling 358,000 in 2Q17 compared to 86,000 in 2Q16, as more customers are shifting to unlimited data for its convenience and to support increasing mobile video usage. TBR believes the price point of Verizon’s unlimited plans is also benefiting subscriber growth while minimizing average revenue per user (ARPU) declines as they strike a happy medium, starting at a lower price point than AT&T’s Unlimited Plus program, competing on-par with multiline T-Mobile One Plus plans without yielding to the overly aggressive pricing of Sprint’s Unlimited Freedom promotions.
Maintaining sufficient LTE capacity is critical as the carrier is continuing to rely on its reputation of providing superior network coverage as its primary differentiator to attract unlimited data coverage. TBR believes Verizon is well-positioned to sustain its unlimited data strategy long term as currently only 50% of its spectrum is being used for LTE and the company can continue to add network capacity via small cells, deploying AWS-3 licenses and refarming 3G licenses for LTE. However, Verizon’s network distinctions are becoming less pronounced as competitors continue to densify their networks and move towards 1Gbps data speeds by implementing LTE-Advanced technologies, which will require Verizon to implement new differentiators to stand out in the unlimited data market.
Despite the success of Verizon’s unlimited data plans, wireless EBITDA margins fell for the third-consecutive quarter in 2Q17, declining 170 basis points year-to-year to 45.8%. Verizon’s diminishing wireless (profit) margins are in part due to the carrier’s shift to a non-subsidy device pricing model as decreased equipment subsidies are failing to offset service revenue declines stemming from lower-priced wireless plans offered under this model. Postpaid ARPU is also being limited by Verizon Plan features including Carryover Data and Safety Mode that are helping tiered data customers conserve data usage. Conversely, TBR anticipates the adoption of unlimited data plans will mainly have a stabilizing effect on postpaid phone ARPU over the next year as migrations from customers on less expensive plans will be offset by the cost savings heavy overage customers will realize by transitioning to unlimited data.
Highlights of Verizon’s Earnings Call Transcript:
Matthew D. Ellis – Verizon Communications, Inc.
We had a strong quarter of execution. First, we invested in our 4G network leadership position, resulting in a sweep of third-party network performance surveys for the first half of 2017, while prepositioning for 5G services. Second, we delivered solid wireless operational performance and financial results in a competitive environment with an increase in both postpaid and prepaid accounts. Third, we successfully completed the acquisition of Yahoo’s operating assets to scale our media business.
Network leadership is the central element of our strategy, and we are continually investing in our network to extend our leadership in 4G capacity growth with densification using small cells, which includes expanding our fiber capabilities. As we prepare for the network of the future, we announced the acquisition of Straight Path for $3.1 billion, which we expect will close by the end of first quarter 2018. Straight Path complements our spectrum portfolio and positions us to lead and further drive 5G technology and its ecosystem. We have begun the pre-commercial fixed wireless trials in eight out of the 11 markets and have our first batch of customers on this technology. As we have previously highlighted, we will have trial results later in the year, and I look forward to sharing them with you.
We had a strong quarter, adding and retaining wireless customers as the momentum from the launch of our unlimited plans was sustained throughout the quarter. We delivered a strong wireless operational performance that reflects customer demand for our high-quality network in a highly competitive market. Finally, we completed the acquisition of Yahoo’s operating assets and immediately began executing on integration plans that we’ve been working on for over a year. We are confident in the execution of our strategy, which we expect to drive profitable growth, generate strong cash flows, and return long-term value to our shareholders.
Total wireline revenue on a reported basis grew 1.2%, including the recently acquired XO operations. On an organic basis, wireline segment revenue decreased 2.8% compared to a decline of 3.2% last quarter. This shift in the wireline revenue trend towards fiber is growing. Organically, fiber based products grew more than 3%, which supports our plans to further invest in fiber. Our emphasis on delivering value to all business customers, from the very small to the large enterprise, was recognized recently in a leading third-party study. More importantly, we won the large enterprise business award for the second consecutive year in the same study.
Consumer markets revenue increased 0.6%, driven by Fios Internet activity. Consumer Fios revenue growth of 4.1% was consistent with the past several quarters. During the quarter, we launched Fios Gigabit Connection in certain markets, which offers symmetrical speeds of up to 1 gigabit per second. In Fios Internet, we added 49,000 customers. Fios Video results were pressured due to softer secular demand for traditional linear video, given growth in the over-the-top offerings, as well as competitive promotional activity. Fios Video losses were 15,000 in the quarter. For the second quarter, Enterprise Solutions revenue fell 4.1% on an organic basis, which was due to persistent trends in our legacy products and pricing compression in the marketplace. On a constant-currency basis, revenue was down 3.5%.
Partner Solutions revenue declined 6.8% on an organic basis, while the revenue mix towards fiber has been trending higher. Within business markets, fiber revenue is expanding, driven by Fios broadband demand, offset by continued pressure in legacy products. On an organic basis, revenue declined 4.9% and improved slightly sequentially.
On a comparable basis, the second quarter wireline EBITDA margin was 20.8%, compared to 13.3%, which included the work stoppage, last year. Sequentially, wireline EBITDA margin was down 120 basis points, primarily due to lower revenue from Enterprise Solutions and Partner Solutions and an increase in operating expense as a result of leasing data center space related to the sale to Equinix.
Commentary from Fierce Wireless:
Whether Verizon can maintain its network edge in an era of unlimited data is unclear, however. Recent data from Ookla indicates that the networks of both Verizon and AT&T have suffered as traffic has ramped up in recent months, as T-Mobile recently pointed out. So Verizon must continue to move quickly to meet the ever-increasing demands of consumers as mobile data traffic soars.
“Subscriber trends recovered sharply this quarter; however, this is partly due to an aggressive push behind unlimited that we don’t think is sustainable for Verizon,” New Street Research analysts said in a note to investors. “They have the least capacity per sub of all the carriers, and their network performance is already deteriorating both in absolute terms and relative to peers. Verizon is also paying for improved subscriber trends with ARPU and service revenue pressure. The recovery in subs is also partly due to record low churn across the industry in general, which we suspect will reverse later in the year with the new iPhone launch.”