“Spectrum is the lifeblood of the network,” said Craig Moffett, founder and analyst at MoffettNathanson. “Part of the reason we don’t have the 5G network everyone has been waiting for is because we didn’t have the right spectrum for it.”
To accommodate the massive level of traffic that high-speed 5G networks will send, wireless companies will need to build highways for that data to travel. Spectrum is like the real estate the U.S. government auctions for carriers to build those highways – the better the real estate, the more lanes they can build, and the faster and more accessible their 5G networks.
“This is a great day for Verizon – I’d even say it’s one of the most important days in our 20-year history,” said CEO and Chairman Hans Vestberg at the start of the Verizon event.
There is no doubt that airlines’ new spectrum ownership will improve the consumer experience of using 5G, Moffett said. But carriers largely expect it will take several years to deploy the new spectrum.
This spectrum auction was crucial
This spectrum auction will help carriers, notably AT&T and Verizon, close a keyhole in their 5G networks.
Three spectrum categories are used to build 5G networks. High band or “millimeter wave” networks offer astonishing speeds but limited geographic coverage. For that reason, it only makes sense for carriers to build high-band networks in densely populated areas such as cities and airports, where many mobile locations can be installed close to each other. “
Low-band spectrum offers much wider coverage, making it effective for use in rural 5G networks, but data rates are only marginally higher than 4G LTE.
Midband is the “Goldilocks” spectrum that provides a balance between speed and coverage, which was largely lacking in US 5G networks until now. Carriers bid on mid-band spectrum at the last auction, and it wasn’t cheap.
Verizon spent $ 52.9 billion to more than double its mid-band spectrum. The company plans to spend $ 10 billion more in capital expenditures over the next three years, on top of existing spending plans, to use the new spectrum.
AT&T are offering $ 27.4 billion to strengthen its mid-band positions, and expects to spend between $ 6 billion and $ 8 billion in additional capital between 2022 and 2024 to build the mid-band network.
The existing mid-band spectrum gives T-Mobile an edge over rivals, analysts say. While Verizon and AT&T won’t be able to start building their new spectrum assets until later this year, T-Mobile already has a mid-band network up and running.
“T-Mobile has won,” Moffett said of the FCC auction. “Their mid-band spectrum position was much better than that of Verizon or AT&T … and they didn’t have to spend anything like the same money to keep that position.”
T-Mobile expects to provide 200 million people with fast 5G by the end of this year. Verizon says it will include more than 175 million people in 2022 and 2023, reach more than 250 million people in total by 2024. And AT&T expects to reach about 100 million people by mid-2023. (Each carrier is reaching far more consumers through their wider, if somewhat slower, low-band 5G networks.)
“We wanted to go in and out of the auction with everything, we have to be the leader in the 5g era for the duration of the 5g era,” T-Mobile President and CEO Mike Sievert told CNN Business. “That is exactly what we have achieved.”
However, unlike T-Mobile, Verizon and AT&T have a fiber optic infrastructure that could help them compete with T-Mobile’s strong spectrum portfolio.
For example, AT & T’s strategy is to meet broadband needs “in a hybrid fashion, deploying fiber in homes, homes, hospitals and small businesses,” Jeff McElfresh, CEO of AT&T Communications said in an interview. “We are balanced in our investments in spectrum and fiber.”
A return on the 5G investment
Building 5G networks is one thing. But it will likely take more work to generate additional income from it.
Stealing individual wireless customers from other carriers by offering a high-quality 5G network is one way to increase sales. But experts say creating additional services on top of the new technology, especially for businesses, is likely to bring the greatest returns from 5G investment.
The mid-band auction will accelerate the opportunity to develop some of those new services and business models, Tami Erwin, executive vice president and group CEO of Verizon Business, told CNN Business, calling the company’s new holdings “spectrum. for the next generation “.
“It’s really powerful for us to unlock some of these use cases – think autonomous driving,” Erwin said.
“Ultimately, it will be those who really run on the network build and make this a more engaging experience,” said Gartner analyst Bill Menezes.