Verizon Will Pilot 5G Fixed Wireless in 2017

Verizon will have a fixed wireless 5G pilot up and running in 2017, CFO Fran Shammo told investment analysts today. That statement came in a first-quarter earnings call that reinforced the network operator's emphasis on building a fiber and wireless infrastructure, primarily to deliver mobile video efficiently. The 5G news seems to put Verizon, which previously was discussing commercial deployment next year, more in line with what others including AT&T are discussing.

Verizon Communications Inc. (NYSE: VZ) is already in 5G tests with multiple vendors, showing the ability to deliver 4K video over mobile networks, and remains "committed to being the first company to roll out 5G," Shammo said. But the trial in 2017 "is not really about mobile, it's all about fixed wireless," he said, seeming to indicate a residential broadband test or something similar.

That all fits into the three-tier strategy he outlined to open the call, which starts at the network connectivity layer and builds upward through global platforms for video and the Internet of Things to incremental revenue opportunities in applications and content.

The results themselves didn't quite meet Wall Street expectations on revenues, but still delivered profits and earnings per share that were on target. Verizon said it earned $4.4 billion, or $1.06 per share, on revenue of $32.2 billion. The latter figure fell just shy of the $32.46 consensus estimate, as reported by Thomson Financial. (See Verizon Earnings Up in Q1 2016.)

Learn more about changing content strategies at the Video Summit, part of our upcoming Big Communications Event in Austin, TX, May 24-25. You can register now.

Shammo admitted the ongoing strike by Verizon workers could affect Q2 earnings, as Verizon has deployed thousands of managers to fill in for striking workers and expects to see installation schedules for new services slip a bit. Also on the labor side, he said Verizon will reduce its call-center workforce through attrition, saying those jobs are high turnover, and fewer people are needed to handle a lower volume of calls from customers who have many more customer service options today.

Among the other notable results:

  • Verizon had 640,000 retail postpaid net adds on the wireless side, including 452,000 new 4G LTE smartphones, and a retail postpaid churn rate of .96%. The smartphone adds are a significant drop from Q4 that is largely attributed to seasonality, Shammo said. Factoring in the loss of 3G and other phones, however, the net phone tally was down 8,000. He told analysts that keeping churn at the current rate isn't likely, however, as a number of two-year tablet subscriptions, based on a free tablet promotion, expire. Most of those aren't being renewed and that strategy was discontinued, he said, but as those contracts end, it will impact the overall churn rate.

  • The 4G LTE network now carries 92% of total data traffic, which increased at a 50% rate last year, Shammo said. Verizon continues its network densification efforts, including the acquisition of XO Communications announced earlier this year and its ongoing small cell buildout, to support higher data speeds and greater penetration, building to 5G.

  • Unsubsidized phone plans are 48% of new customers and that is lowering service revenues. As that number grows to more than half this year, Shammo predicted, service revenues will stabilize and turn positive in 2017. Most customers not opting for the phone subsidy are choosing installment payment plans with that total hitting 5.5 million.

  • Global enterprise revenue was down 3.1% year over year and global wholesale revenue slipped 4% over the same period, as part of a general decrease in revenue on the wireline side of the business. By cutting costs, however, Verizon managed a 1.2% bump in the EBITDA for the wireline segment.

  • While Boston was a "unique" opportunity for a FiOS buildout that Shammo called "a no-brainer," there aren't current plans to add other FiOS cities in Verizon's shrinking local service footprint. He didn't rule out adding cities such as Alexandria, Va., or Baltimore to the mix, however, noting neither of those municipalities have FiOS.

  • AOL had its best quarter in five years, Shammo said, and was up $300 million year-over year.

Shammo had a lot to say about Verizon's video strategy and its focus on mobile video and content for the millennials. My colleague Mari Silbey will be providing coverage on those issues elsewhere on Light Reading.

— Carol Wilson, Editor-at-Large, Light Reading

DanJones 4/22/2016 | 5:01:45 PM
Re: a different take on 5G fixed wireless I think it's safe to say that wireless will never be as fast as the fastest wires. I wouldn't like to predict how fast 5G will be in actual loaded networks yet, too soon to say.
Bruce Kushnick 4/22/2016 | 3:05:30 PM
a different take on 5G fixed wireless I have a different take. Around 2010, Verizon started diverting the wireline capx budgets of the state utilities  to fund the wires to the cell towers -- and not wire the cities with fiber. And this was tied to Lowell McAdam, formerly CEO of wireless to the new Verizon CEO...

This helped to make the local networks look unprofitable as the wireless company wasn't paying for infrastructure build outs and made wireless very profitable. Verizon  used this to claim they should 'shut off the copper', and not do the upgrades to fiber throughout the East coast.

It helps to close down the unions and block competition who are tied to the copper and can't migrate to fiber in areas where there is FiOS.

They also created a division of the wires where special access services was moved so that there was no accounting of the revenues or even access lines. -- and these hidden networks are now the basis of Verizon Wireless infrastructure.

So, 5g will never do the 1 gig speeds as promised -- 4G was to be at 100 mbps and averages 10mbps with a strong wind. And this is fixed wireless so while shutting off the copper and claiming it is unprofitable (even though the FCC found 60% of the special access services was based on 'mostly copper' and highly profitable—using the exact same copper wires) -- and they will shut off whole areas of cities' wires, especially rural areas-- to make more money from the wireless services. Moreover,  Verizon Wireless is not a union shop, mostly, and this also kills off competitors who rely on the copper and aren't allowed on whatever fiber is around.

The other wireless companies will pay multiples to use these networks--as is the case today, and whole areas of the US will not get 5 G if it's 'fixed' -- as it requires 'densification' -- There will be no direct competitor to the cable wires as is the case today in most of America-- FiOS is in about 50% at best, and wireless is not regulated the same way so basics, like an inexpensive utility service for say alarms circuits, will not be around, and the 'quaity of service' rules will be relaxed.
steve q 4/22/2016 | 5:32:29 AM
Re: Told you so! But with the issue of them selling off the Florida states it will be hard for Verizon wireless to push 5g hotspot. Why do they not use there try to use FiOS data customer when they put FiOS into Boston Ma. When they build out the fiber hubs they can place fiber antenna that will provide the need data speed for the hotspots and business can use those to provide service to those customers in the location. Then hoping for 5g that most customer do not even own a 5g device.
Mitch Wagner 4/21/2016 | 4:44:02 PM
Enterprise down Enterprise business decline is interesting. Where does that end up, I wonder? Will Verizon do as previously rumored and divest its enterprise business?

DanJones 4/21/2016 | 1:00:30 PM
Re: Told you so! Well, Lowell McAdam *did* reportedly say they would have commercial 5G in 2017. But I've never known him not to be overly-optimistic with launch schedules, to put it mildly.
cnwedit 4/21/2016 | 12:49:39 PM
Re: Told you so! Glad they finally got their message sync'ed with your reporting, Dan!

DanJones 4/21/2016 | 12:36:20 PM
Told you so! I reported that Verizon was looking at fixed for 5G first back in November. I've also been speaking with Verizon today (story coming soon), one thing to understand is that Verizon, just like any other operator, can try to speed up the development curve of 5G, which they are definitely trying to, but there's only much that can be done. The miniturization of the technology so that it can be used in mobile devices is difficult and ongoing.

Of course, Verizon is going to do fixed and hotspot-type stuff first. Did anyone really think they were going to speed so far ahead of the industry and be out with a 5G phone in 2017? It'll be like 4G was, routers/hotspot type stuff first, then modem cards etc. 

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