Verizon's new network chief cool toward small cells

Verizon's new networking chief doesn't seem too enthusiastic about small cells.

"Right now we're kind of on a steady path of adding macros [cell towers] and small cells to densify the network where we see capacity or coverage needs," Verizon's Joe Russo said Tuesday at the Wells Fargo TMT Summit. "I think we have a lot of buildout on the macro mods [modifications] to add C-band [spectrum], that is our primary focus for our capital dollars. I'm not sure that beyond that I see a real need to further densify. But I would say it's a watch and see."

Verizon and its rivals have primarily focused on deploying their midband spectrum holdings, such as C-band spectrum, using their macro cell towers. Such efforts have shifted the US wireless industry's focus away from small cells, which generally cover smaller geographic areas and typically sit atop buildings or light poles.

Broadly, Russo seemed to suggest that Verizon might only embark on a bigger small cell buildout if users demanded improvements to the operator's coverage and capacity.

"It's a tool that we use right now," he said of small cells. "We definitely are starting to dream a little bit about what the future 5G Ultra Wideband network might look like. But I think it's going to be more use-case driven, that would say we have to go beyond our normal cadence of expansion."

Russo recently took over control of Verizon's network from Kyle Malady. Verizon counts around 40,000 small cells in its network, primarily supporting its millimeter wave (mmWave) spectrum holdings.

Russo added that Verizon would continue to build its own small cells inside its fiber footprint, but would work with third parties to build small cells sitting outside its fiber footprint.

The Elliott angle

Russo's comments would appear to run counter to statements from Verizon CTO Ed Chan in 2022. According to the financial analysts at Wells Fargo, Chan said last year that Verizon would speed up its small cell buildout starting in 2023. 

Russo's new comments are also noteworthy considering the ongoing debate over Crown Castle's future. Elliott Investment Management, an activist investor firm, is embarking on another campaign against Crown Castle, arguing the company needs to overhaul its management and potentially put its fiber business up for sale. Such a sale might include Crown Castle's 115,000 small cells.

Elliott pursued a similar campaign against Crown Castle in 2020.

"Fundamentally, the 3.5 years since Elliott's last campaign have gone by without the significant ramp in small cell node deployments that Crown Castle had expected, and returns have not improved and in some cases gotten worse," wrote the financial analysts at Raymond James in a note to investors this week. "The slow growth and low returns of this business 3.5 years later in our view provide evidence that the magnitude of demand for small cells (not just the timing) are lower than what Crown Castle and some industry analysts had anticipated."

Crown Castle executives revealed that the company will meet its planned goal of deploying 10,000 new small cells this year, which is double the number of small cells the company deployed in 2022. The company said it expects to increase its small cell deployment in 2024 to 14,000 nodes.

Others share Crown Castle's small cell enthusiasm. "We remain really optimistic about what's going to happen in the small cell segment in the coming years," said Marc Ganzi, CEO of DigitalBridge, during his company's recent quarterly earnings call. DigitalBridge owns Extenet, another US small cell provider. Ganzi explained that demand for small cells will grow amid rising interest in private wireless networks for enterprises, as well as increased use of AI tools like ChatGPT.

According to a recent accounting by the Wireless Infrastructure Association, there were 142,100 cell towers and 452,200 outdoor small cell nodes across the US at the end of 2022.

Beyond small cells

During his appearance at the investor event, Russo also offered insights into a number of issues at Verizon.

On the Biden administration's $42.45 billion Broadband Equity, Access and Deployment (BEAD) program, he said Verizon might pursue some of that funding to expand its fiber network. However, he said the company would only look to expand its fiber reach in its existing fiber footprint. Outside that footprint, he suggested the company might look for BEAD funding for fixed wireless Internet services.

Russo also said that Verizon's private wireless networking business is gaining momentum. "We're seeing momentum going into 2024," he said of the operation. "The pipeline is very robust."

He added that Verizon's private wireless networking business is driving demand for its edge computing services. He said that was a surprise considering the company initially expected demand for edge computing to drive sales of private wireless networking services.

Russo also said that Verizon has not seen much demand for public edge computing services – such services are different from the private edge computing products that typically sit inside an enterprise's premises. But he said public edge computing "is absolutely something we're preparing for."

He also reiterated his view that open RAN technology is not yet ready to support the 64T64R MIMO networking technologies that Verizon wants to deploy in its network.