Verizon: mmWave Is Not 'a Coverage Spectrum' for 5G
Verizon's CEO fought back against concerns about the operator's 5G buildout and coverage plans using millimeter-wave (mmWave) spectrum, arguing that the operator's initial 5G launches are "performing as expected."
However, Verizon's CEO Hans Vestberg did say that "we all need to remind ourselves, this is not a coverage spectrum. We will do it as far as economically sustainable."
Added Vestberg: "It's a good strategy … the engineering team feels good about it."
During the operator's quarterly conference call with investors, Vestberg disputed the notion that his comments about mmWave coverage represented a change to Verizon's 5G strategy. "I don't think we've changed anything about what we've thought about millimeter wave, how we want to deploy that. And we are deploying it massively at the moment. Remember, the majority of all the traffic is in dense, urban areas where we are now initially focusing," he said.
But he added that Verizon will deploy "dynamic spectrum sharing" technology next year that will allow the operator to actively move customers' traffic across various 4G and 5G spectrum bands. And he said Verizon would finish re-farming its 3G spectrum by 2020. Those efforts, he said, will give Verizon more options when it comes to rolling out 5G beyond the mmWave spectrum. "Right now we are in discussions, but of course it's going to be whatever low-band you want to have, mid-band and high-band. That's how it works. But over time all spectrum will be exposed to dynamic spectrum sharing," he said.
mmWave concerns growing
Vestberg's comments are noteworthy in light of ongoing criticisms that the operator's initial 5G mmWave efforts haven't amounted to much. For example, Craig Moffett, analyst with MoffettNathanson, earlier this year visited Verizon's 5G Home deployment in Sacramento and wrote that the firm's findings of limited coverage and low penetration "suggest that earning an attractive return will be challenging, at best."
And BTIG analyst Walter Piecyk voiced similar concerns after visiting Verizon's Chicago deployment of mobile 5G. "Verizon has insisted that it can use their existing cell site footprint to roll out 5G technology on millimeter wave spectrum. That seems very hard to believe," Piecyk wrote. "In our limited testing, the 5G small cells provided coverage of just ~350 feet. In fact, 5G performance suffered from reduced reliability beyond 200 feet when faced with street obstructions. That's not even close to the 800-2,000 feet radius that Verizon and their vendors have promised."
And yesterday T-Mobile's CTO Neville Ray piled on by arguing that "Verizon's mmWave-only 5G plan is only for the few. And it will never reach rural America," he wrote. "Some of this is physics -- millimeter wave (mmWave) spectrum has great potential in terms of speed and capacity, but it doesn't travel far from the cell site and doesn't penetrate materials at all. It will never materially scale beyond small pockets of 5G hotspots in dense urban environments."
In a note on Verizon's earnings today, Craig Moffett of MoffettNathanson wrote that "to be sure, the questions about millimeter wave spectrum aren't new. But the shortcomings of millimeter wave spectrum have become more and more evident in recent months," he wrote to investors. "The challenges posed by millimeter wave spectrum have increased the perceived urgency for Verizon to acquire mid-band spectrum. Unfortunately, there is a big difference between needing mid-band spectrum and actually getting it. The U.S. has moved slowly to make mid-band available."
During Verizon's earnings call, Vestberg sidestepped questions about Verizon's mid-band spectrum strategy and overall spectrum plans. He essentially reiterated the operator's position that, eventually, 5G will be deployed in all spectrum bands, but didn't offer any commentary about when Verizon might expand its 5G offering beyond its initial mmWave spectrum deployments.
AT&T's '5G E' remains contentious
Verizon's approach to 5G and mmWave spectrum stands in contrast to AT&T's strategy. AT&T has already changed the signal icon on a wide range of its LTE phones to show "5G E" instead of LTE, an action that has earned AT&T widespread condemnation. Sprint sued AT&T over the issue, though Sprint said this week it reached an agreement with AT&T to settle the lawsuit, without providing details. Reports indicate AT&T will continue to move forward with replacing its LTE indicator with the "5G E" indicator.
Interestingly, AT&T's decision to do so even earned the operator a rebuke this week from the billionaire CEO of Salesforce, Marc Benioff, who Tweeted a picture of the icon: "Does [this] mean I'm now on 5G in San Francisco with 10 Gigabits with super low latency? My phone doesn't have a 5G chipset but it reads 5G," he wrote.
But AT&T is concurrently building mobile 5G NR technology in mmWave spectrum using the "5G+" icon in a handful of cities, and has also promised to deploy 5G NR technology in its sub-6GHz spectrum nationwide by next year.
Verizon's Google deal and Q1 results
Although 5G played a starring role in Verizon's Q1 commentary, it wasn't the only topic the operator's executives covered. Verizon also disclosed a major new deal with Google to sell YouTube TV across its mobile, 5G Home and FiOS customer footprint. The operator didn't provide details on the move -- including what prices it might sell YouTube TV for -- but the development appears to give Verizon an answer to AT&T's move to sell DirecTV Now alongside its mobile and wireline offerings.
Verizon also raised its full-year 2019 earnings guidance to "low single-digit percentage growth," above its expectation that it would be flat when compared with its 2018 results.
As for its Q1 results, Verizon reported wireless service revenue growth of 4.4%, above most Wall Street analysts' expectations and Verizon's highest rate of growth since the third quarter of 2014.
However, Verizon said it lost a net 44,000 postpaid phone connections during the quarter, a number higher than most analysts had expected. Verizon reported 61,000 retail postpaid net additions in the first quarter of 2019, which the operator said consisted of 44,000 phone net losses and tablet net losses of 156,000, offset by 261,000 other connected device net additions, primarily wearables.
In terms of financials, Verizon reported net income of $5 billion, up roughly 11% from the year-ago quarter. The operator's quarterly revenue clocked in at $32.1 billion, a 1% increase.
Verizon also said it has so far cut $3 billion in costs out of its overall business, as it works to reach its cost-savings goal of a total of $10 billion in cost cuts by 2021. That's also the same year Verizon said it will be finished with its migration to an "intelligent edge network."
AT&T reports its first-quarter results tomorrow morning.