Verizon's Fiber Spend Won't End With Corning
Verizon needs a lot of fiber for future 5G rollouts, which leads to the age-old question: build it or buy it?
Earlier this year, Verizon released a forecast of its capital expenditures for 2017 as somewhere between $16.8 billion and $17.5 billion. Now the telco has further announced that it will spend at least $1.05 billion of its capex budget over the next three years with Corning, purchasing optical equipment for fiber deployments. (See Verizon Looks Ahead to 5G as 4G Competition Affects Q4.)
As part of its partnership with Corning Inc. (NYSE: GLW), Verizon Communications Inc. (NYSE: VZ) began fiber rollouts in Boston last year under a One Fiber initiative that calls for densifying fiber assets to prepare for 5G fixed wireless services. Fiber backhaul promises to be a huge issue for 5G, and the telecom industry as a whole is struggling with how best to prepare for new requirements with the technology that will tax their existing infrastructure. The question is, do telcos build out more fiber themselves? Or do they try to acquire it from other companies?
At the moment, Verizon appears to be going with the former option, but it remains to be seen if a widespread fiber build is on the table. One choice that Verizon may be considering instead is the purchase of a cable company with fixed-line, last-mile infrastructure already deployed. That wouldn't be a cheap option, but it could potentially be a fast route to fiber support for 5G.
Merger and acquisition speculation is rampant now as the Federal Communications Commission (FCC) wraps up its quiet period following the completion of the incentive auction for wireless spectrum. Some analysts believe Verizon could end up buying Dish Network LLC (Nasdaq: DISH) to acquire new spectrum assets, but others believe the company may be in the hunt for a cable operator like Comcast Corp. (Nasdaq: CMCSA, CMCSK) or Charter Communications Inc. to earn itself a last-mile network in several markets that could serve as backhaul for new 5G services. (See Verizon CEO Comments Feed Merger Frenzy.)
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However, if Verizon were to seriously consider acquiring a cable company, it would first need to determine if a cable company's fiber assets are suitable for 5G deployments. CEO Lowell McAdam has said that he thinks Verizon will need super-dense fiber to support 5G, in the neighborhood of 1,700 fiber strands per cable. That, unfortunately, is not typical of deployed cable networks.
On the other hand, running counter to McAdam's assumption is the fact that Comcast has said it believes its existing wireline infrastructure maps perfectly to future 5G needs. (See Comcast: Our Network's Ready for 5G.)
Both Verizon and Comcast may be overstating their positions as a prelude to negotiations. Or they may both be stating the situation as they see it, even if their views differ on what 5G will require. The only thing that's certain is that more spending for fiber assets is on the way. Verizon's $1-billion-plus investment with Corning is just the start.
— Mari Silbey, Senior Editor, Cable/Video, Light Reading
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