“Spectrum is the lifeblood of the network,” said Craig Moffett, founding partner and analyst at MoffettNathanson. “Part of the reason we do not have the 5G network that everyone has been waiting for is that we did not have the right spectrum for it.”
To be able to transmit wireless companies to the large amount of 5G networks, wireless companies need to build highways to drive on the data. Spectrum is like the real estate offered by the US government for auction services to build those highways – the better the property, the more lanes they can build, and the faster and more accessible their 5G networks are.
“This is a great day for Verizon – I want to go so far as to say that it’s one of the most important days in our 20 – year history,” said Hans Vestberg, CEO and Chairman, at the start of Verizon’s event said.
Moffett says there is no doubt that the new spectrum ownership of the transportation companies will improve the experience of using 5G. But the carriers largely expect it to take several years to put the new spectrum into use.
This spectrum auction was crucial
This spectrum auction helps carriers, especially AT&T and Verizon, fill a significant gap in their 5G networks.
Three categories of spectrum are used to build 5G networks. Networks with a high band or millimeter wave offer blindingly fast speeds but limited geographic coverage. For this reason, it only makes sense for transportation companies to build high-band networks in densely populated areas such as cities and airports, where many cell sites can be installed close together.
Low band spectrum offers much wider coverage, making it effective for use in nationwide 5G networks, but data speeds are only slightly faster than on 4G LTE.
Mid-band is the “Goldilocks” spectrum that balances speed and coverage, which has so far been largely lacking in US 5G networks. Manufacturers offered on the mid-range spectrum during the latest auction and it was not cheap.
Verizon spent $ 52.9 billion on more than double the mid-range spectrum. The company plans to allocate $ 10 billion more capital expenditure during the next three years, in addition to the existing expenditure plans, to put the new spectrum into use.
AT&T offers $ 27.4 billion to strengthen its mid-band holdings, and expects to spend between $ 6 billion and $ 8 billion in additional capital on the mid-band network expansion between 2022 and 2024.
Its existing mid-range spectrum puts T-Mobile ahead of competitors, analysts say. While Verizon and AT&T can only start building on their new spectrum possession later this year, T-Mobile already has a mid-band network underway.
“T-Mobile has won,” Moffett said of the FCC auction. “Their position in the mid-range spectrum was much better than Verizon or AT & T’s … and they do not have to spend the same amount of money to maintain the position.”
T-Mobile expects to cover 200 million people with 5G speeds by this year. Verizon says it will cover more than 175 million people in 2022 and 2023, to reach a total of more than 250 million people by 2024. And AT&T expects mid-2023 to cover about 100 million people. (Each carrier reaches far more consumers through their wider, albeit somewhat slower, low-band 5G networks.)
“We wanted to go in with everything from the auction and we need to be the leader in the 5g era for the duration of the 5g era,” Mike Sievert, president and CEO of T-Mobile, told CNN Business. “That’s exactly what we have achieved.”
Unlike T-Mobile, however, Verizon and AT&T have fiber infrastructure that can help them compete with T-Mobile’s strong spectrum portfolio.
AT & T’s strategy, for example, is to meet broadband needs ‘in a hybrid way, with fiber being deployed to homes, to homes to hospitals and small businesses,’ said Jeff McElfresh, CEO of AT&T Communications, in an interview. . “We are balanced in our investments in spectrum and fiber.”
A return on the 5G investment
It’s one thing to build 5G networks. But generating extra income from it will probably require more work.
Stealing individual wireless customers from other service providers by offering a high quality 5G network is one way to increase sales. But experts believe that creating additional services in addition to the new technology, especially for businesses, is likely to yield the greatest returns on 5G investments.
Tami Erwin, executive vice president and group CEO of Verizon Business, told CNN Business that the new businesses are a spectrum for the next generation.
“It’s very powerful for us to be able to unlock some of these use cases – think of autonomous management,” Erwin said.
“Ultimately, it’s going to be who really builds it on the network, and to make it a more compelling experience,” said Gartner analyst Bill Menezes.