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Verizon Could Expend Network Capacity By 2020, Says Analyst

November 30, 2015 - Written By Muni Perez

Verizon is the largest wireless carrier in America with almost 140 million subscribers, which obviously consume a lot of data. As for a recent report from The Wirecutter, the company has the best network among the four major carriers, but according to another report from analysts at New Street Research, if Verizon (VZ) doesn’t do anything in the meantime, its network will run out of capacity by 2020. The conclusion was based on VZ’s current spectrum holdings, noting that the company will either have to buy additional spectrum or let go millions of customers in order to maintain network quality. According to New Street, Verizon currently holds only 50% of the capacity they will need by 2020.

The report goes on saying that, although Verizon has been installing small cells to maintain the service, these cells only carry about 1/3 of the capacity when compared to a macro site. As such, just to maintain current quality of service, the company would need to add 80,000 small cells to the top 25 markets, translating to a significant cost. If the number of subscribers was to grow – and they should, of course – Verizon would have to install even more towers, making the challenge even bigger. According to the report, another consequence for Verizon would be the loss of subscribers as customers would switch to less-congested networks such as T-Mobile and Sprint, which lag far behind in number of subscribers, meaning that they still have a lot of capacity to offer. As previously reported, the overall network demand will grow at an astonishing rate over the next 5 to 6 years, with individual data jumping from the current 3.8 GB/user/month to a monthly 22 GB per user, meaning that all carriers will have to invest heavy in increasing network capacity. The text adds that while re-farming, carrier aggregation, small cells, and the upcoming 5G will help all carriers to cope with network demand, both Verizon, and AT&T, which by far hold the largest number of subscribers, will have to spend a lot more money than T-Mobile and Sprint to keep up with their service.

However, the report view is not shared by other analysts, as Tim Farrar from TMF argued that the calculations made by New Street don’t take in consideration several factors, including the capacity boost carriers get from deploying new technologies such as LTE-U and MIMO on current cells. According to Farrar, the switch from current 2×2 MIMO to a newer 4×4 MIMO systems reduces the capacity gap from 50 to 14%. “Perhaps Verizon do actually understand network engineering and the potential for network capacity enhancements better than analysts with a simplistic, erroneous spreadsheet model?” Farrar pinned. However, responding to TMF’s declarations, New Street Research pointed that a recent $45 billion earned by FCC on the auction of AWS-3 spectrum is a sign that carriers may be desperate to get more capacity. The market is surely shifting and the tendency is that the demand will be indeed monstrous. According to another report from Strategy Analysts, the U.S. market will add 100 million new subscribers by 2020, so you should include this to the 22 GB per user/month data usage by that time. That said, all we can do is see what carriers will do to keep their services running smooth.