“Spectrum is the lifeblood of the network,” said Craig Moffett, founding partner and analyst at MoffettNathanson. “Part of the reason we didn’t have the 5G network that everyone was waiting for is that we didn’t have the right spectrum for it.”
To accommodate the enormous level of traffic that high-speed 5G networks will transmit, wireless companies need to build highways for data to travel. Spectrum is like the property that the United States government is auctioning for operators to build these highways – the better the property, the more lanes they can build and the faster and more accessible their 5G networks.
“This is a big day for Verizon – I would say it is one of the most significant days in our 20-year history,” said CEO and chairman Hans Vestberg, at the start of the Verizon event.
“There is no question” that operators ‘new spectrum properties will improve consumers’ experience of using 5G, said Moffett. But operators believe it will take several years to put the new spectrum to use.
This spectrum auction was crucial
This spectrum auction helps operators, especially AT&T and Verizon, fill an important gap in their 5G networks.
Three spectrum categories are used to build 5G networks. High-band networks, or “millimeter waves”, offer incredibly fast speeds, but limited geographic coverage. For this reason, it only makes sense for operators to build high-band networks in densely populated areas such as cities and airports, where many cell sites can be installed close to each other. “
The low band spectrum offers much broader coverage, making it effective for use on 5G networks across the country, but data speeds are only marginally faster than 4G LTE.
The middle band is the “Goldilocks” spectrum that balances speed and coverage, which has been largely lacking in US 5G networks so far. Operators bid on the middle band spectrum at the last auction and it didn’t come cheap.
Verizon spent $ 52.9 billion to more than double its investments in the mid-band spectrum. The company plans to allocate an additional $ 10 billion capital expenditures over the next three years, in addition to their existing spending plans, to put the new spectrum to use.
ATT offered $ 27.4 billion to strengthen its mid-band holdings and expects to spend between $ 6 billion and $ 8 billion in additional capital from 2022 to 2024 in building the middle-band network.
Its existing mid-band spectrum puts T-Mobile ahead of its rivals, analysts say. Although Verizon and AT&T are unable to begin building their new spectrum assets by the end of this year, T-Mobile already has a mid-band network up and running.
“T-Mobile won,” said Moffett of the FCC auction. “Their mid-range spectrum position was much better than Verizon or AT&T coming in … and they didn’t have to spend the same kind of money to maintain that position.”
T-Mobile expects to cover 200 million people with high-speed 5G by the end of this year. Verizon says it will cover more than 175 million people between 2022 and 2023, reaching a total of more than 250 million people by 2024. And AT&T expects to cover around 100 million people by mid-2023. (Each operator reaches far more consumers through its broader low-band 5G networks, although a slightly slower.)
“We wanted to get in and out of the auction with everything, we need to be the leaders in the 5g era during the 5g era,” T-Mobile President and CEO Mike Sievert told CNN Business. “This is exactly what we did.”
However, unlike T-Mobile, 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 in homes, homes, 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 5G return on investment
It is one thing to build 5G networks. But generating additional revenue from them is likely to require more work.
Stealing individual wireless customers from other operators, offering a high-quality 5G network, is a way to increase sales. But experts say the creation of additional services based on the new technology, especially for companies, is likely to produce the operators with the highest return on investment in 5G.
The midband auction accelerates the ability to develop some of these new services and business models, Tami Erwin, executive vice president and CEO of the Verizon Business group, told CNN Business, calling the company’s new holdings “spectrum for the next generation”.
“It is really powerful for us to be able to unlock some of these use cases – think in the autonomous direction,” said Erwin.
“In the end, it will be who will actually build the network and make the experience more attractive,” said Bill Menezes, an analyst at Gartner.