30M homes servable, 35% penetration in five years, significantly raising earnings. Brett Feldman made a gutsy call today. Brett has been accurate in the past about Verizon plans; he's the only other person who in Spring 2017 projected 30M. Brett's assumptions are. 

  • Verizon will add 5G millimeter wave to all their existing cell sites. (I estimate 60,000-70, 000.) This brings about 30M homes out of incumbent territory within 2,000 feet. He expects that to be mostly completed by 2022.
  • Verizon has demonstrated a gigabit at 2,000 feet, although I believe VZ  has provided no data on what percent of customers within 2,000 feet will actually be gigabit capable.
  • Based on a large rollout in 2019 going forward and matching the 35% to 40% take rate for Fios, he calculates a likely 7.9M subscribers for 2023. Verizon today has only 7M broadband customers.
  • Feldman expects Verizon mostly to upgrade existing cell sites rather than build many new ones in this period. He sees little increase in capex. I calculate that will allow Verizon to reach ~40% mmWave coverage, including incumbent territory. They will have "Gigabit LTE" elsewhere delivering speeds in the hundreds of meg. 
  • $50/month is the most likely price but he expects Verizon to experiment. 

If these presumptions prove true, mmWave fixed will be a profitable service to any wireless carrier who does not have a decent landline broadband offering. Nearly all European carriers and most Asians disagree, as I confirm in my report for STL Partners. 

Making similar assumptions for AT&T, they would reach almost half the U.S. because they have a larger incumbent territory. For now, AT&T is apparently undecided. The engineers are ready to go big but the CFO is unconvinced.

dave askOn Oct 1, Verizon will turn on the first $20B 5G mmWave network, soon offering a gigabit or close to 30M homes. The estimates you hear about 5G costs are wildly exaggerated. Verizon is building the most advanced wireless network while keeping capex at around 15%.

The Koreans, Chinese, and almost all Europeans are not doing mmWave in favor of mid-band "5G," with 4G-like performance. Massive MIMO in either 4G or "5G" can increase capacity 4X to 10X, including putting 2.3 GHz to 4.2 GHz to use. Cisco & others see traffic growth slowing to 30%/year or less. Verizon sees cost/bit dropping 40% per year. I infer overcapacity almost everywhere.  

The predicted massive small cell builds are a pipe dream for vendors for at least five years. Verizon expects to reach a quarter of the U.S. without adding additional small cells. 

In the works: Enrique Blanco and Telefonica's possible mmWave disruption of Germany; Believe it or don't: 5G is cheap because 65% of most cities can be covered by upgrading existing cells; Verizon is ripping out and replacing 200,000 pieces of gear expecting to save half. 

-------------------

 5G Why Verizon thinks differently and what to do about it is a new report I wrote for STL Partners and their clients.

STL Partners, a British consulting outfit I respect, commissioned me to ask why. That report is now out. If you're a client, download it here. If not, and corporate priced research is interesting to you, ask me to introduce you to one of the principals.

It was fascinating work because the answers aren't obvious. Lowell McAdam's company is spending $20B to cover 30M+ homes in the first stage. The progress in low & mid-band, both "4G" and "5G," has been remarkable. In most territories, millimeter wave will not be necessary to meet expected demand.

McAdam sees a little further. mmWave has 3-4X the capacity of low and mid-band. He sees an enormous marketing advantage: unlimited services, even less congestion, reputation as the best network. Verizon testing found mmWave rate/reach was twice what had been estimated. All prior cost estimates need revision.

My take: even if mmWave doesn't fit in your current budget, telcos should expand trials and training to be ready as things change. The new cost estimates may be low enough to change your mind.