Analysts peer into carrier activity
Analysts Nick Del Deo of MoffetNathanson and Colby Synesael at Cowen & Co. highlighted carrier activity, C-Band auction results and the tower industry outlook during the Infrastructure Developers Forum last month. Here are some highlights:
Verizon won 160 megahertz of spectrum on average during the C-band auction and 60 megahertz on average in the valuable A-block. A-block spectrum could be available by the end of the year, Synesael noted. The rest of the spectrum is supposed to be cleared by December 2023. Verizon expects to deploy some of that as early as 2021, aiming to build out 7,000 to 8,000 cell sites by year-end using the AWS/PCS network. Verizon expects to spend roughly $10 billion in incremental capital expense over a three-year period, which is in addition the $18 billion it is anticipating spending before the C-band auction. Synesael said he expects to see investment in the network ramp up in tower spend in the back half of 2021 and meaningfully in 2022 and beyond.
Verizon’s bet on millimeter-wave technology has not really played out, said Del Deo. As such, the C-band spectrum is an opportunity to rectify that issue. Given that Verizon has under 70,000 sites today, it will be investing in C-band sites for years to come because C-band doesn’t propagate as well as lower band spectrum.
AT&T’s capex plans have been consistent, which is good, Synesael commented. The operator expects to spend around $68 billion in capex to deploy C-Band between 2022 and 2024. It is focused on marketing to customers today using the strategy of Buy One, Get One Free, but that model is not sustainable and it will have to invest in its network.
T-Mobile’s merger with Sprint was completed April 1, 2020, but the newly combined carrier was slow out of the gate. However today T-Mobile is moving forward, working to maintain its advantage in 5G, decommissioning the sites it doesn’t want to keep and integrating the sites it plans to keep. Over time, T-Mobile will expand into more rural areas as well, Del Deo said.
T-Mobile is expected to put 2.5 GHz on tens of thousands of cell sites starting this year. Although the carrier is decommissioning those sites from its financials, if a tower owner has a lease with the company that doesn’t expire until 2025, it will still honor those payments, Synesael said.
While T-Mobile is expanding into rural markets, DISH will be focused on the urban core in order to meet the terms set for its buildout, which is to reach 50% of the population by mid-2023 and 70% of the population by 2025, Del Deo commented.
The potential opportunity with DISH is for true 5G non-phone-oriented Internet of Things opportunities, Synesael said, but it is difficult to understand that business model because it is conceptual at this point.
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New spectrum, federal funding could fuel strong year for infrastructure providers
When COVID-19 hit the United States, there was a huge amount of political capital that acknowledged the nation needed better broadband networks to deliver healthcare services, educate students and perform well enough to hold up under a lot of workers who suddenly were forced to work remotely, commented veteran analyst Blair Levin of NewStreet Research. Levin joined WIA President and CEO Jonathan Adelstein for a discussion hosted by Len Forkas of Milestone Communications during the Infrastructure Developers Forum virtual spring event.
Federal Level Actions that Could Impact Industry
That political good is going to play out in a big way as a combination of market trends converge in 2021 and 2022, Levin said. These trends include 5G buildouts, the C-band auction buildout, federal money to support broadband buildout in rural areas, $20 billion Congress approved for broadband and another $10 billion approved for consumer subsidies for broadband connectivity. Indeed, the pandemic made people appreciate that connectivity is important to how we function as a society.
However, if the Biden Administration requires 100 Mbps uplink speeds and 100 Mbps downlink speeds, that effectively precludes anything but fiber connectivity, including 5G wireless services, Adelstein noted. “I don’t think Congress has an appreciation for what 5G can do,” Levin added.
There are legitimate debates around future-proofing the networks, but also concerns about the 60 million to 80 million people who cannot afford broadband connectivity, Levin said. A study should be done to see what kinds of speeds a family with three students and a parent working from home need for robust connectivity. They might not need equal uplink and downlink speeds.
Verizon and AT&T spent a whopping $80 billion on C-band spectrum, and Verizon especially would like to put that spectrum to use quickly, Levin noted. The problem with spending so much money at auction is the money should be spent on networks.
A big question for DISH is how it executes building its network, Levin noted. In some ways, DISH may be better off because it is riding a technological breakthrough and does not have to worry about a legacy network. Hiring former T-Mobile executive Dave Mayo to build the network was a good move, Adelstein added.
2021 will be the first time since 2015 when all carriers have active buildout plans, Forkas commented. That could contribute to a scarce workforce, Levin said.
Congress needs to understand that 5G is imperative to broadband buildout, Adelstein noted.
Two big use cases for 5G are online real-time gambling and telehealth, Levin commented. Telehealth services allow elderly people to stay in their homes longer instead of being forced to move into nursing homes. However, 5G deployments will be a bit of a slog, Adelstein noted. Carriers are dealing with a different underlying architecture than they had with 1G to 4G, Levin added. When 4G was being deployed, industry pundits assumed it would be used for video, but no one predicted Uber and DoorDash applications.
No one has yet come up with the big idea that causes mobile operators to speed up their 5G deployments to take advantage of new revenues, Levin said. There are certain things that only mobile can do. Going forward, the infrastructure industry needs a vision that goes out to 2030 and 2040.
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