Verizon Is Basing 5G Deployment On Commercial Realities

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Matt Ellis, Verizon’s new Chief Financial Officer, spoke today during the company’s fourth quarterly results conference call and explained how America’s largest carrier would deploy commercial 5G networks only if a number of factors were right. These factors were driven by the need for the business to produce a return from its investment and included deployment costs, network speeds, coverage and efficiencies. Ellis explained that Verizon Wireless had made “good progress” during its 2016 5G technical trials and reiterated that the company has deployed “about ten” larger trials around the country. However, he would not confirm where these are and also said that the company would “see how those trials go.” One of Ellis’ key statements is the carrier would only roll out 5G infrastructure if it can generate sufficient return on the investment and “if it provides a great return for shareholders.” Given the significant costs that setting up a new network is going to incur, and that the company is still improving its LTE network, Verizon is being cautious with its shareholders.

Ellis also explained that the company is planning to continue to deploy the newer networking features of LTE Advanced. The carrier is seeing its network development costs moving from improving coverage to network densification efforts, that is, increasing the bandwidth by providing additional nodes to cover population and to enable these higher performance LTE Advanced technologies. Verizon continues to reuse, or refarm, existing spectrum away from older networks into 4G LTE networking and use small cell site technology to improve coverage. As such, the company’s capex is designed to both reduce the cost of delivering data to the customer and to improve the performance, capacity and scalability of the existing LTE network using new technologies.

Nevertheless, despite the focus towards LTE densification, Verizon Wireless is laying the foundations for a nationwide 5G network. It is still closing the acquisition of XO assets, which will provide Verizon with additional fiber coverage in 40 major U.S. markets. This additional fiber infrastructure is useful for both Verizon’s 4G LTE network densification projects but also for any 5G networks it builds in the coming months or years. The carrier is also continuing a number of 5G tests, typically offering the service for nothing as it will derive valuable information from the trials. Even if Verizon Wireless does not launch any major commercial 5G network in 2017, it is still preparing its backhaul infrastructure for the next generation cellular data network technology.