Verizon held its 2021 Investor Day, discussing a wide range of topics including its C-band auction results, 5G network build-out plans, towers and small cells deployment to support different frequency ranges, and updates on initial 5G use cases including fixed wireless access (FWA) or broadband and mobile edge computing (MEC).
C-band Auction Update and Build-Out Plans
In this section, we discuss highlights from Verizon’s 2021 Investor Day with a focus on C-band and its corresponding deployment by Verizon.
C-band Auction Results
Verizon secured 140 MHz to 200 MHz of contiguous C-band spectrum depth in every available market across the United States. Specifically, Verizon’s C-band winnings equate to an average of 161 MHz of C-Band depth nationwide. Importantly, the company acquired 60 MHz of spectrum depth in the early clearing A-Block, (i.e., initial 46 markets), which Verizon targets using by the end of 2021. Overall, the C-band auction allowed Verizon to increase its sub-6 GHz spectrum holdings by 120%.
In order to secure this C-band spectrum, Verizon is paying the Federal Communications Commission (FCC) $45.5bn, through two further payments. Firstly, on March 10th, Verizon made an initial 20% or $8.2bn payment, using its cash on-hand. Secondly, on March 24th, Verizon will make the remaining 80% or $36.4bn payment, using a combination of financing from its bank facilities, public debt markets, and cash on-hand. Note that Verizon previously made an upfront payment, representing the balance of its C-band costs, in November 2020.
Finally, Verizon’s total C-band outlay will rise by $7.4bn, to $52.9bn. This increase factors in clearing costs paid to the incumbent satellite operators of the C-band spectrum.
Verizon’s 5G Network Build-Out Plans – Multiple Bands
Verizon will allocate an incremental $10bn to C-band capital expenditures over the next three years. Specifically, initial C-band and 5G spending will focus on upgrading a portion of Verizon’s existing 66k towers. Indeed, in 2021, Verizon anticipates that it will equip 7k to 8k towers with C-band antennas and the appropriate connectivity, to supplement 5G bandwidth requirements.
Beyond towers, Verizon is also increasing its use of small cell digital infrastructure for its 5G network. At the end of 2020, Verizon had 17k high-band (millimeter wave) cell sites, which are primarily small cells. Additionally, Verizon intends to deploy another 14k+ high-band (millimeter wave) cell sites in 2021. Therefore, by year-end 2021, Verizon will have 31k+ high-band (millimeter wave) cell sites online, using small cell infrastructure.
As a result of these small cell deployments and increasing consumer adoption of 5G, Verizon expects that 5% to 10% of its overall network usage will be on high-band (millimeter wave) spectrum by the end of 2021. Furthermore, over the next few years, Verizon expects 50% of urban traffic to be on high-band (millimeter wave) spectrum.
C-band Deployment Plan – Points of Presence (PoPs)
Within the next 12 months (i.e., March 2022), Verizon intends to cover 100 million PoPs with C-band. Additionally, by 2023, Verizon projects it will reach 175 million PoPs with C-band. Finally, as the second phase of C-band spectrum is cleared and goes into service, Verizon expects that by 2024, or later, it will cover 250+ million PoPs with C-band, achieving nationwide coverage.
5G Adoption on the Verizon Network
Overall, Verizon expects that 55%+ of its consumer postpaid subscribers will be on 5G phones by the end of 2023. More granularly, Verizon’s customers currently have 10 million devices that are compatible with 5G high-band (millimeter wave) spectrum. Of these devices, 70%+ (or 7+ million devices) are already capable of using C-band, such as the iPhone 12.
Verizon highlights that C-band is critically important because it can facilitate peak speeds of 1 gigabit per second and is a widely used spectrum band throughout the world, which makes it optimal for roaming.
Digital Infrastructure and 5G Use Cases
In this section, we discuss highlights from Verizon’s 2021 Investor Day with a focus on Verizon’s digital infrastructure and new business use cases for 5G.
Fiber and Small Cells – Verizon’s High-Band Digital Infrastructure
Verizon’s ideal 5G network consists of a deep fiber network, with thousands of small cells connected to that fiber. To this end, Verizon has an aggressive fiber build program, in more than 60 markets, outside of its ILEC footprint. Indeed, Verizon is placing significant numbers of those small cells on its own fiber – more than any other wireless carrier.
At the end of 2020, 1/3rd of Verizon’s 4G and 5G cell sites were served by its own fiber infrastructure. Importantly, the company plans to increase this figure, such that 50%+ of its 4G and 5G cell sites use Verizon-owned fiber by 2023. In turn, this strategy will allow Verizon to achieve owner’s economics with its fiber infrastructure, which results in both cost and performance advantages.
Fixed Wireless Access – 5G Use Case
One of the important 5G use cases that Verizon will unlock with high-band (millimeter wave) and the newly acquired C-band spectrum is fixed wireless access (FWA). Verizon expects that Fixed Wireless Access (FWA) will represent a multi-billion dollar revenue opportunity in the coming years.
5G Home – Consumers
Verizon brands its consumer-facing Fixed Wireless Access product as 5G Home. Overall, using both its 4G and 5G networks (i.e., sub-6 GHz frequencies), Verizon expects to cover 15 million households with 5G Home by year-end 2021. At the same time, Verizon’s 5G Home will cover between 1 to 2 million households on high-band (millimeter wave) frequency ranges by the end of 2021.
Longer-term, Verizon has set broadband coverage goals for 5G Home, using sub-6 GHz frequencies, of 30 million households by year-end 2023 and 50 million households by year-end 2025.
5G Business Internet – Office
Verizon recently launched 5G Business Internet, offering broadband to enterprises, in three markets, on high-band (millimeter wave) spectrum, including Chicago, Houston, and Los Angeles. Moreover, Verizon expects to offer 5G Business Internet in more than 20 markets by the end of 2021.
In total, Verizon anticipates that 5G Business Internet will more than double the company’s current broadband addressable market. Indeed, this business market is incremental to the consumer opportunity.
Mobile Edge Computing (MEC) – 5G Use Case
Mobile edge computing (MEC) brings together Verizon’s high-band (millimeter wave) 5G network with Amazon Web Services’ (AWS) cloud capabilities. In 2021, Verizon will expand its mobile edge computing (MEC) capability to 10 additional cities across the United States. As a result, this will bring Verizon’s total to 20 cities across the United States with what it brands as 5G Edge.
Verizon forecasts that mobile edge computing (MEC) services will represent a $30bn+ addressable revenue opportunity by 2025. Specifically, Verizon’s 2021 Investor Day highlighted three distinct groupings for this revenue: i) U.S. edge compute, ii) global private networks, and iii) U.S. enterprise solutions.
U.S. Edge Compute (Public and Private) – Market
By year-end 2022, Verizon estimates the mobile edge computing (MEC) total addressable market in the U.S. will reach $1bn. Furthermore, by 2025, Verizon foresees rapid adoption of mobile edge computing (MEC), creating a $10bn addressable revenue opportunity in the U.S.
Global Private Networks – Market
Verizon forecasts that connectivity services for private networks will be a $10bn global addressable revenue opportunity by 2025.
U.S. Enterprise Solutions – Market
U.S. enterprise solutions consist of co-developed solutions, which enable real-time applications. These include intelligent logistics, predictive maintenance, robotics, and factory automation on a private edge platform. Specifically, Verizon considers the U.S. enterprise solutions market to be a $12bn addressable revenue opportunity by 2025.
Verizon intends to commercialize this opportunity through its partner ecosystem. For example, Verizon has already started developing enterprise solutions with IBM, Cisco, Deloitte, and SAP. Indeed, these solutions reside in many industry verticals, including manufacturing, retail, distribution, and logistics.