C band auction
Verizon Outlines Plans for C-Band and mmWave 5G, Business Internet and MEC
C-Band auction results:
Verizon has outlined its plans to expand 5G network coverage using the spectrum it acquired in the recent C-band auction. The company pledged to cover 100 million Americans with its new C-band 5G network—which it will brand as “ultra wideband”—by next March
Verizon succeeded in more than doubling its existing mid-band spectrum holdings by adding an average of 161 MHz of C-Band nationwide for $52.9 billion including incentive payments and clearing costs.
Verizon won between 140 and 200 megahertz of C-Band spectrum in every available market. Specifically, Verizon:
- Secured a minimum 140 megahertz of total spectrum in the contiguous United States and an average of 161 megahertz nationwide; that’s bandwidth in every available market, 406 markets in all.
- Secured a consistent 60 megahertz of early clearing spectrum in the initial 46 markets – this is the swath of spectrum targeted for clearing by the end of 2021, home to more than half of the U.S. population.
- Secured up to 200 megahertz in 158 mostly rural markets covering nearly 40 million people. This will further enhance Verizon’s broadband solution portfolio for rural America.
The auction results represent a 120 percent increase in Verizon’s spectrum holdings in sub-6 gigahertz bands. The quality of this spectrum and Verizon’s depth of licensed holdings represent the premier asset in the industry. In addition, C-Band is a widely used spectrum band throughout the world and will allow for roaming opportunities and economies of scale. The spectrum bands Verizon won are contiguous, which will streamline deployment of this spectrum across the mainland United States.
At an analysts meeting on Wednesday evening, the company said the improved services will help it accelerate wireless network service revenue growth. Verizon expects growth of at least 2 percent this year, 3 percent in 2022 and 2023 and 4 percent or more in 2024. It’s committed an extra $10 billion in capex over the next three years to support the additional 5G network roll-out. Projected spending this year is in the range of $17.5-18.5 billion.
5G mmWave: The super-fast 5G mmWave network that Verizon launched two years ago has seen slow growth, even though Verizon has put up 17,000 cell sites. It’s a very short-range technology, and it’s best used in places like stadiums, concert halls, and convention centers—all the places that have been hardest hit by the pandemic.
Only 5% of Verizon’s total network usage will be on millimeter-wave by the end of 2021, although that could double if stadiums fill up again, according to Verizon CTO Kyle Malady. Only 9% of the carrier’s postpaid customer base has mmWave-capable phones.
Ultimately, he sees as much as 50% of 5G network usage moving to mmWave in dense cities. Of course, that involves people going outside to use it, because mmWave requires line of sight communications so can’t penetrate building walls or other structures.
Verizon is looking at using millimeter-wave for focused backhaul, which will let it put up more rural sites quickly without worrying about running fiber to them.
The company intends to put up another 14,000 millimeter-wave sites this year, Malady said. There’s still technical room for improvement with millimeter-wave, he added. Verizon is working with three different repeater vendors to improve range without adding entire new sites, and he has a “roadmap with Qualcomm” for better beamforming and software features to improve both range and latency.
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In the next 12 months, Verizon expects to have incremental 5G bandwidth via the new spectrum available to 100 million people in the initial 46 markets, delivering 5G Ultra Wideband performance on C-Band spectrum. Over 2022 and 2023, coverage is expected to increase to more than 175 million people and by 2024 and beyond, when the remaining C-Band is cleared, more than 250 million people are expected to have access to Verizon’s 5G Ultra Wideband service on C-Band spectrum.
In addition, Verizon is committing to an additional $10 billion in capital expenditures over the next three years to deploy C-Band as quickly as possible. This spend will be in addition to the current capital expenditure guidance of $17.5B-$18.5B for 2021, which is expected to be at comparable levels through 2023.
C-Band spectrum in Verizon’s Network:
More than 70% of the 5G devices in the hands of customers today are C-Band compatible. Every iPhone 12 model is C-Band compatible. The Samsung Galaxy S21 series and Google Pixel 5 are also compatible. Going forward, all new 5G handsets Verizon brings to market to postpaid customers will be C-Band compatible, with more than 20 C-Band compatible devices offered by the end of the year.
The acquisition of this C-Band spectrum will be a critical component in Verizon’s 5G broadband strategy — 5G Home and 5G Business Internet.
5G Home: By the end of this year, Verizon expects to cover nearly 15 million homes with its home broadband product, and by the end of 2023, 30 million homes, using both 4G and 5G.
To accompany the growth in fixed broadband offerings, the company introduced new 5G Home devices which will be simple for customers to install in their homes – including the Internet Gateway, and the Verizon Smart Display, which join the Verizon 5G Internet Gateway. All three devices will have a sleek design and ‘self setup’ featuring AR guidance, simple instruction videos, and in-app chat and call support.
5G Home internet, the super fast service with download speeds up to 1 Gbps, depending on location, is currently available in 18 markets, with one to two million households expected to be covered via mmWave by end of 2021 and a total of 15 million with LTE Home and the arrival of the first tranche of C-Band. Verizon has teamed up with some of the best content providers in the industry to bring customers plenty of options for all their gaming and streaming needs.
5G Business Internet: 5G Business Internet complements the full suite of Verizon Business tools and offerings, including OneTalk voice communications, BlueJeans by Verizon video-collaboration platform, advanced security and other business services.
By using a high powered fixed 5G receiver, business customers will be able to access the broadband speeds they need with the reliability from Verizon they have come to expect. 5G Business Internet is now available in three markets on mmWave with plans to bring the product to 20 more before the end of the year.
Accelerate 5G Edge:
Verizon Business is well positioned to capture significant edge compute share and is in-market today with both public and private MEC models in collaboration with leading cloud providers. With the addition of C-Band spectrum, the company expects a wider and faster path to monetization.
By the end of 2022, the total edge compute addressable market in the U.S. is estimated to reach $1 billion, and by 2025, rapid adoption of Edge Compute is estimated to create a $10 billion addressable marketplace.
Public MEC Model: Last year, the company partnered with AWS: Wavelength and immediately connected AWS’s 1 million plus developer community to the nearly 170 million end-devices across Verizon’s 4G and 5G Nationwide networks at the edge. Developers today are building use cases spanning a wide array of commercial applications – all through an easy on-ramp in the AWS portal where they can move their workloads to the edge of our network, automatically triggering a recurring revenue share for Verizon and AWS. This partnership enables Verizon Business to be a key participant in this growing opportunity with C-Band accelerating our reach and time to market.
Private MEC Model: Last year, Verizon Business announced a collaboration with Microsoft to deliver a Private MEC model for customers that want a completely dedicated edge compute infrastructure on-premise to provide unique connectivity for their employees, enable data-intensive applications and benefit from solutions like computer vision, augmented reality and machine learning – all built to increase productivity, provide enhanced security and reduce latency in ways that wi-fi cannot.
This fully integrated Verizon 5G solution includes:
- Verizon Private Edge, which combines the power of Microsoft Azure cloud and edge capabilities with 5G on the customer premise.
- Verizon Private network connectivity, which is forecast to be a $10 billion dollar global market by 2025.
- Co-developed real-time enterprise solutions like Intelligent Logistics, Predictive Maintenance, Robotics and Factory Automation, which give Verizon Business a direct line of sight to another $12 billion applications and solutions addressable opportunity by 2025 that will be commercialized through a growing partner ecosystem, including IBM, Cisco, Deloitte and SAP.
The demand for MEC services unlocks an estimated Verizon total market that is forecast to exceed $30 billion by 2025, revenue that will be shared with partners.
Verizon expects to increase service revenues by shifting people to higher-tier unlimited (text, talk, Internet) cellular plans.
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Quotes from Executives:
Hans Vestberg, Chairman and CEO of Verizon
FCC C-Band auction results
“Today is one of the most significant days in our 20-year history. This was a highly successful auction for Verizon – a once in a lifetime opportunity – and I am thrilled with what we were able to accomplish.”
Verizon’s strategy
“Our growth model is based on a clear vision: We are a multi-purpose network company with the best networks architected by the best engineers on the planet. This idea of a multi-purpose network at scale is our strategic foundation to maximize growth and put us in a position to realize the best return on investment in the fully-networked economy.”
Verizon’s competitive advantage
“Since we began building 5G, we have had a first mover advantage. We are more than a year ahead in building and selling mmWave with our 5G Ultra Wideband service and still the only company with commercial Mobile Edge Compute. Now we intend to extend our lead by accelerating our deployment of C-Band. Our new C-Band position combined with our mmWave, means we are the only carrier suited to deploy the fastest, most powerful 5G experience to the most people – or as we call it, 5G built right.”
Ronan Dunne, CEO of Verizon Consumer Group
5G adoption
“Customers are migrating to 5G in earnest. As of YE 2020, 9% of our Consumer postpaid phone base were on a 5G device. With the exciting device lineup we have in store, and the superior 5G experience that we deliver, we expect to reach 50% some 18 months ahead of GSMA forecast, and end 2023 ahead of even the more ambitious Ericsson Mobility Report forecast.”
5G devices
“Overall we have 10M 5G Ultra Wideband devices in the hands of customers on our network today. And of those, approximately 70% are already C-Band compatible. Going forward all new 5G handsets we sell to postpaid customers will be C-Band compatible.”
Step ups
“We have seen tremendous step-ups from our customers from Metered to Unlimited and Unlimited to Premium Unlimited as we discussed back in November. We continue to see this with over 20% of our postpaid accounts ending the year on a Premium Unlimited plan. We expect this number to grow to over 30% this year and approximately 50% by 2023. With C-Band included, we think step-ups to premium will only accelerate.”
5G Home acceleration
“By the end of 2021 we will have between 1 and 2 million millimeter wave 5G Homes open for sale and some 15 million in total with the arrival of the first tranche of C Band. By the end of 2023 this will have risen to more than 30 million households we can serve.”
Tami Erwin, CEO of Verizon Business
Mobile Edge Compute
“Verizon Business has a strong first-mover advantage to build a nationwide Mobile Edge Compute platform and be both a market leader and a market maker. This is not just an idea, it’s happening. Companies in every industry are finding exciting ways to bring 5G and 5G Edge to life – leveraging the full capabilities of 5G from throughput and ultra-low latency to sensor densification and rock solid reliability.”
Kyle Malady, CTO of Verizon
Auction results
“We secured a game-changing amount of C-Band spectrum to go along with our leadership in millimeter wave spectrum. We’ve been planning for many months, and are already working to make this the fastest deployment of new spectrum ever. As the leader in the wireless industry, we have consistently deployed a deep portfolio of strong spectrum holdings with best in class technology capabilities. This same focus will continue to position us for growth for years to come.”
Matt Ellis, CFO of Verizon
“Our Network as a Service strategy is our foundation when considering significant investments. We’ve leveraged that framework, investing in key strategic areas, such as spectrum, network assets, partnerships, and disciplined M&A, to position us for this next technology era.”
“Our strategy is working. Our core business is producing revenue growth today. More customers are experiencing the benefits of 5G Ultra Wideband every month on our millimeter wave spectrum and C-Band helps us accelerate the timeline and expand upon that growth.”
Analysis: FCC’s C band auction impact on U.S. wireless telcos
by Grant’s Interest Rate Observer:
The Federal Communication Commission’s (FCC’s) ongoing sale of wireless C-band spectrum rights marks a decisive event for the telecommunications industry. As industry players compete for more digital bandwidth to help roll out 5G services, aggressive bidding looks set to generate a windfall for the U.S. government. Estimated proceeds will exceed $80 billion, easily topping the prior record of $45 billion for FCC spectrum in 2015.
As the three-way battle for 5G dominance takes shape, former also-ran T-Mobile U.S., Inc. appears to have the jump on competitors Verizon Communications, Inc. and AT&T, Inc., thanks in large part to substantial midrange spectrum frequency gained from last year’s acquisition of Sprint Corp. “For many years, Verizon hammered its competitors time and time again with the ‘best network’ and their big red coverage map,” Sasha Javid, chief operating officer of wireless company BitPath, told Bloomberg on Jan. 22. “Well, the map is looking quite magenta [signifying T-Mobile’s corporate color] today in terms of 5G coverage around the country.”
The incumbents will need to pay up to catch up. Analysts at New Street Research wrote on Jan. 11 that “if T-Mobile spends less than we expect, Verizon or AT&T will likely account for the shortfall. Neither company has the cash on hand to cover what we expect them to spend in the auction at present; we would expect more debt issuance for the group in coming weeks.”
Extra borrowings that accompany Verizon and AT&T’s 5G spending spree look to do no favors for the pair’s respective capital structures. Craig Moffett, co-founder and one-half eponym of MoffettNathanson, LLC, estimated last Tuesday that triple-B-plus-rated Verizon may spend up to $40 billion on 5G digital real estate, enough to add nearly one full turn of leverage to its 2.3 times reported net borrowings (3.2 times after accounting for operating leases and pension liabilities) as of Dec. 31. Analyst Craig Moffett wrote:
“Higher leverage will mean that capital spending will, by necessity, be pinched and stretched. Lower capital spending will mean that it will take longer to deploy their C-Band spectrum, which, in turn, will mean Verizon will be slower to catch up to T-Mobile.”
Meanwhile, Verizon’s other peer has already tapped the credit markets to finance its own shopping spree. This morning, triple-B-rated AT&T officially entered into a $14.7 billion, 364-day term loan offering at 100 basis points over Libor, with proceeds earmarked for general corporate purposes, including the financing of additional spectrum.
The new borrowings color AT&T’s dubious distinction as the world’s most encumbered non-financial company. Net debt footed to $198 billion, inclusive of operating lease and pension liabilities (equal to 3.6 times consensus 2021 adjusted Ebitda) as of Dec. 31, following efforts to diversify into higher growth businesses via the 2015 and 2018 purchases of DirecTV and TimeWarner for $67 billion and $109 billion, respectively. More debt could further complicate efforts to both tame its bloated balance sheet and improve slumping operating results including sharp subscriber losses and fast-retreating Ebitda within the DirecTV business.
Those problems have helped pressure shares to the tune of negative 18% after accounting for dividends since a bearish analysis in the Dec. 13, 2019 edition of Grant’s Interest Rate Observer, compared to a 24% total return from the S&P 500 over that period. By way of response, AT&T has pivoted to asset sales, including recently shopping DirecTV to private equity companies at a reported $15 billion price tag, while prioritizing its quarterly dividend, now at a 7.2% trailing annual rate. On last week’s conference call, CEO John Stankey reiterated plans “to use free cash flow after dividends for the next couple of years to pay down debt.”
Noting that the company is in danger of exceeding the 3.5 times adjusted leverage limit that Moody’s Investors Service has cited as a projected ceiling for AT&T to maintain its investment grade imprimatur, MoffettNathanson wrote last Wednesday that the spectrum sale left Ma Bell with two bad choices:
Sitting out the auction would have left them far behind in 5G; buying spectrum would leave their dividend looking even more unsustainable. Damned if you do, damned if you don’t.
Selling DirecTV now will help slow the overall rate of Ebitda decline, but it won’t solve the basic problem. AT&T’s leverage is far too high for a shrinking company, and their dividend is too high for them to do anything serious about lowering it. Something’s gotta give.
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References:
UPDATED: Mid-band Spectrum for 5G: FCC C-Band Auction at $80.9B Shattering Records
Importance of FCC C Band Auction for 5G in the U.S.
FCC Chairman Ajit Pai has described the commission’s plan for its auction of a portion of the C-band — the 4Ghz to 8GHz radio frequencies used mostly for consumer satellite transmissions, but in the future for 5G mobile broadband.
The FCC wants to auction off the bottom 280MHz (the 3.7 – 4.2Ghz range) of the C-band and reserve 20Mhz of the band above that threshold for further needs. Both the FCC and current satellite operators say this will still leave enough spectrum for the operators to provide the same level of service that we have today.
The C-band is a valuable block of very underutilized spectrum. Portions of it are also a great addition to mobile operators who want to roll out 5G using the mid-band spectrum.
The 3.7 to 4.2Ghz range of the C band would offer a great balance of range and capacity which is important when carriers want to offer any real nationwide 5G service. A combination of low-band, mid-band, and upper millimeter-wave bands would offer carriers plenty of spectrum to maintain existing networks and add 5G expansion from coast to coast, and that’s what carriers and the current FCC wants to see happen.
Executives from Verizon, AT&T and T-Mobile stated their support for Federal Communications Commission (FCC) Chairman Ajit Pai’s proposal to get C-band spectrum cleared and available for a public auction, a plan that immediately saw backlash from some senators and public interest groups.
The network operators’ support isn’t surprising given they’ve been pressing for more mid-band spectrum for 5G and lobbying for quick action on C-band spectrum specifically, but they’re all coming at it from different places.
Currently, four satellite operators provide the majority of C-band satellite service in the U.S. — Intelsat, SES, Eutelsat, and Telesat. These are the companies that provide the actual satellite broadcast that you might be paying another company for and reach well over 100 million homes.
The satellites and ground equipment need to be changed so that they use the upper 200MHz of the C-band to transmit at the same level of service we’re all used to. The cost of this relocation is expected to be in the $3 billion to $5 billion range and will be covered by the auction winners.
The FCC would like this relocation, which is expected to be finished by September 2025, to be expedited. It proposes what chairman Pai calls “accelerated relocation payments.” These would also be paid by the winning bidders, but only if the satellite operators meet a specific schedule: free the lowest 100MHz of the spectrum by September 2021 and the remaining 180MHz by September 2023. Should this occur, the fees would include these expedition bonuses and rise to $9.7 billion.
Chairman Pai says that this is almost necessary if the U.S. wants to be competitive with the rest of the world when it comes to 5G:
“It is in the public interest to make available frequency in the C-band as quickly as possible as part of a national priority to promote American leadership in 5G. To get the job done quickly, we need to align the private interest of satellite companies with the public interest.”
Pai also notes that these are simply FCC proposals and that Congress can overrule any or all of them.
While acknowledging that Congress can have the final say, Pai also stated the regulations that allow the FCC to make these decisions.
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Section 316 of the Federal Communications Act grants authority to modify any licenses granted to current holders of C-band spectrum, section 309 allows the FCC to auction the lower 280MHz of the spectrum for “flexible” use, section 303 allows the FCC to set new rules and regulations for the technical usage of the C-band, and Title 3 allows the FCC to require the auction winners to pay any and all relocations fees.
Pai also suggested that he hopes Congress will make a small override to the proposed FCC recommendations and offer 10% of the proceeds to rural broadband initiatives. This is a promise Pai has made and championed for since placed as FCC chair, yet so far we’ve seen no movement from carriers or to regulations.
If there is to be any real nationwide 5G network that’s reliable and stand-alone, we’ll have to see plenty of spectrum reallocation. Some, like this news, will be authorization for new use cases and others will be carriers repurposing existing holdings. It will take a lot of work before any country has a full 5G nationwide network.
References:
https://www.multichannel.com/news/c-band-auction-timetable-plan-faces-challenges
