Verizon reported 1Q20 earnings today and its conference call with investors this morning was dominated by the impact of the pandemic, with an interesting twist about its overall 5G strategy.
Verizon’s overall message is the company is weathering the COVID-19 storm well, even though there are some negative financial implications.
During the question and answer session, industry analyst Craig Moffett of MoffetNathanson posed an interesting COVID-19 context question to Verizon executives. Moffett asked if Verizon is considering altering its 5G spectrum strategy in the face of COVID-19, since Verizon has focused primarily on millimeter wave spectrum (mmWave) for 5G, which is suited well for dense-urban environments, like stadiums, arenas, and airports.
Social Distancing Impact
The implication is with the current environment of social distancing, the venues that are best served by Verizon’s 5G spectrum are hardly used right now. And there’s no real clear understanding of when, or if, they will be used again. At least in the context of pre-pandemic usage patterns.
There’s certainly a short to mid-term impact, as the country is struggling to determine when social distancing rules will be relaxed. It could be weeks, months, or perhaps longer. No one really knows when we’ll see packed sports stadiums and arenas again.
Or when we’ll see downtown urban entertainment districts back into full swing. These environments are perfectly suited for Verizon’s current 5G strategy of relying on relatively short range mmWave spectrum to deliver an ultra-broadband mobile experience. Perhaps the impact is longer term.
“I still feel confident that dense urban areas will continue to be dense urban areas, at the moment we still see a lot of usage in dense urban areas, it’s just that we see less movement of people because they’re staying home,” said Verizon CEO Hans Vestberg in response to Moffett’s question. “We are not changing the strategy how we execute both on the broader nationwide as well on our city deployments.”
It’s an interesting observation by Moffett. As a society, we are all trying to determine what the “new normal” will be. If that new normal includes continuing some form of social distancing for very large gatherings, it could impact Verizon’s 5G strategy.
Additionally, with all carriers’ wireless retail store distribution network virtually closed, Verizon can’t really demonstrate its 5G service. With most urban dwellers staying at home, and accessing Wi-Fi for use on their mobile devices, one would assume they have no real compelling reason to need to upgrade to Verizon 5G. That’s true of course for all carriers.
In all likelihood, the pandemic will slow the adoption of 5G, at least in the short to mid-term, but perhaps longer. Verizon may have more exposure to this trend, given its 5G strategy is very urban dense focused.
Moffett’s question included reference to mid-band 5G spectrum, which is better suited to expand 5G coverage beyond the dense-urban core. Specifically, will Verizon now pivot to trying to obtain more mid-band spectrum?
Vestberg did appear interested in adding mid-band spectrum, especially C-band spectrum. C-band, which is comprised of spectrum between 3700-4200 MHz, is seen as optimal 5G spectrum, providing a good balance of coverage and high speed capability. The FCC has set a December 2020 timeframe for a C-band spectrum auction.
“On the mid-band, as I said before, especially the C-band, we think that is an attractive spectrum because first of all, as I said, it’s a good coverage, but also it’s a global roaming standard for 5G, and of course we want to be part of that,” said Vestberg. “We are encouraged by FCC’s plan to conduct the C-band auction in December.”
