OpenSignal’s State of American Wireless Networks – Aug. 2017

Verizon Wireless customers are seeing declining wireless internet speeds and the greater potential for congestion because Verizon Wireless is experiencing the impact of some overburdened cell sites in some of its largest markets.

Walter Piecyk from BTIG Research reports over the last few weeks, Verizon has begun using the last 10MHz of PCS spectrum left in its inventory in New York City, nine months earlier than expected.

Verizon’s reserve spectrum in PCS Band 2 near 1900MHz is not as ideal as lower frequency spectrum better able to manage inside buildings in a city as densely packed as New York, but if that is all the company has left for immediate use, that is what it will use. The newly activated frequencies, first uncovered by Milan Milanovic, are not yet operational across all of Verizon’s extensive cell network in the Big Apple. Verizon’s need to activate its last remaining PCS frequencies suggests former chief financial officer Fran Shammo may have been overly optimistic when he claimed Verizon was only using 40% of its spectrum inventory. That may be true in smaller cities, but is no longer the case in large metropolitan areas.

“This latest action also means that the only spectrum Verizon has left to convert to LTE in NYC is the 25MHz of 800MHz spectrum that the FCC gave it for free in 1984,” wrote Piecyk. “Unfortunately, that 800MHz spectrum is being used to support CDMA voice traffic and legacy 3G data for enterprise/IoT applications. Meanwhile, Dish sits on 125MHz of vacant spectrum in NYC.”

BTIG Research has been carefully tracking Verizon’s deployment of its spectrum for years. In New York, LTE expansion has depended heavily on spectrum acquisitions and enabling LTE+, which bonds frequencies together to increase speed and capacity.

BTIG Research Tracks Verizon Wireless’ LTE Deployment in NYC

• 20 MHz: December 2010 – launched LTE on the 20MHz of 700MHz spectrum it bought in the 2008 700MHz auction for $0.46/MHz/POP for the Northeast regional license and $0.77/MHz/POP nationwide.
• 40 MHz: December of 2013 – XLTE-branded rollout of AWS spectrum, which mainly included the spectrum it bought from Cable in 2011 for $0.69/MHz/POP, but also the spectrum it acquired in the 2006 AWS-1 auction, where it spent $1.33/MHz/POP for the Northeast regional license and $0.73/MHz/POP overall.
• 20 MHz: December of 2014 – LTE conversion begins on PCS spectrum. Verizon purchased 10MHz from Northcoast as part of a larger transaction valued at $1.58/MHz/POP in 2003, 10MHz covering NYC from NextWave for $4.63/MHz/POP in 2004, and 20MHz from NextWave in 2005 as part of a larger transaction valued at $2.85/MHz/POP. (Link)
• 10 MHz: Q1 of 2016 – This enabled Verizon to deliver 15MHz x 15MHz connections on Band 2, thereby improving speeds. When this happened we predicted the remaining PCS spectrum would be used in early 2018. (Link)
• 10 MHz: Q3 of 2017 – Once again, this was spotted by Milanovic (Link), who notes that it has not been deployed on all sites. This effectively expands the Band 2 deployment to a 20MHz x 20MHz deployment.

The company has also attempted to increase capacity with network densification, which adds more cell sites to divide up the traffic load. But activating a new cell site can take years, especially if Verizon encounters zoning and permitting problems or public opposition. Small cells can ease congestion in particularly dense traffic areas, but are not enough alone to deal with increasing network traffic.

Verizon’s own business practices have also complicated things for the wireless company. Ditching two-year contracts and subsidized phones in favor of customers acquiring devices at retail prices financed through wireless carriers like Verizon have led to a slowdown in subscriber upgrades as consumers hold on to their devices for longer.

Most phones acquired in the last year or two now support Voice over LTE (VoLTE), which means phone calls travel over Verizon’s LTE network, not the legacy CDMA network Verizon has used for well over a decade. Verizon has to dedicate a significant amount of prime spectrum in the 850MHz band for its CDMA network. Although Verizon claims it has migrated “more than 50%” of its voice traffic to the newer, more efficient VoLTE standard, that is below analysts’ expectations.

Piecyk thinks it may be possible Verizon has been slow to convert because of the record low phone upgrade rate of its customers. As a result, it cannot repurpose its CDMA spectrum for LTE use. Discussions with Verizon engineers suggest the company may eventually cut back CDMA spectrum, but will likely still keep 5 x 5MHz reserved for CDMA voice calling for at least the next four years to support its customers with older devices.

As part of its network densification effort, Verizon is once again relying on fiber optic buildouts, some of which it may take on itself in areas where it does not provide landline service. Verizon will be placing cables with 1,700 strands of fiber, so it is obviously thinking about future network demands.

Before it can deploy additional upgrades or acquire more spectrum, customers can anticipate more “network management” techniques, suspects Piecyk, especially now that unlimited data plans are for sale again. Verizon already limits its “unlimited” plan to 22GB of usage per month, before wireless data speeds are throttled. OpenSignal believes Verizon’s recent speed drops are a result of its unlimited plans putting more pressure on its network.

“We suspect management will now follow T-Mobile’s lead and suppress video quality like BingeOn to help with the rise in network traffic,” Piecyk wrote. “They might also discuss control of overall peak data speeds. However, if no mobile applications require more than 10Mbps service, would it make any sense to suppress the speeds on your customers’ phone? What’s the benefit other than offering a convenient excuse on why your speed tests are slower than the competition?”

Citigroup is advocating for another super-sized merger, this time lobbying Comcast to buy Verizon Communications — a deal worth up to $215 billion.

Citigroup analyst Jason Bazinet believes the more corporate friendly Trump Administration would not block or impede a deal that would bring together the nation’s largest cable operator and wireless provider. Such a merger would leave a significant portion of the mid-Atlantic, northeast, and New England with a monopoly for telephone and broadband service.

Bazinet offers four reasons why the deal makes sense to Wall Street banks like his:

• Verizon Wireless could give Comcast customers internet access seamlessly inside and outside of the home;
• The cost of expanding fiber optics to power faster internet and forthcoming 5G wireless broadband would be effectively split between the two companies and there would be no need to install competing fiber networks;
• Verizon would benefit from additional wireless consolidation because it would no longer face significant emerging wireless competition from Comcast;
• A combined Comcast-Verizon could see their corporate tax rate slashed by a considerable percentage, reducing tax liabilities.

We’d add Wall Street banks that win the enviable position of advising one company or the other on a merger deal stand to make tens of millions of dollars on consulting fees as well.

Such a merger would be unthinkable under prior administrations, if only because a combination of Verizon and Comcast would eliminate the only significant telecommunications competitor for tens of millions of Americans, giving the combined company a monopoly on telecommunications services.

Some Wall Street analysts believe a deal is still possible with Republicans in charge in Washington. But some spinoffs are likely. One scenario would involve selling off Verizon’s wireline assets in areas where Comcast and Verizon compete. But increasing questions about the financial viability of a likely buyer like Frontier Communications may make a deal bundling old copper wire assets and FiOS Fiber in New Jersey, the District of Columbia, Maryland, Delaware, Massachusetts, and Virginia a difficult sell for other buyers.

“If Brian came knocking on the door, I’d have a discussion with him about it,” Verizon CEO Lowell McAdam reportedly said this spring, according to Bloomberg News, referring to Comcast CEO Brian Roberts.

McAdam shouldn’t wait in his office, however. This morning, as part of a quarterly results conference call, Roberts made clear he wasn’t particularly interested in a merger with a wireless provider.

“I thought we were really clear last quarter,” Roberts said. “Yes, we always look at the world around us and do our jobs related to the opportunities that are out that. But we love our business. No disrespect to wireless, but that’s a tough business.”

South Jersey: The worst broadband problems are in the southernmost counties closest to Delaware.

Customers hoping New Jersey’s telecom regulator would compel Verizon to expand fiber to the home service across southern New Jersey are out of luck.

The New Jersey Board of Public Utilities (BPU) approved a settlement between Verizon New Jersey, Inc., Cumberland County, and 18 southern New Jersey towns that alleged Verizon failed to properly maintain its wireline network in areas where it has chosen not to deploy FiOS — its fiber to the home service. But the settlement will only compel Verizon to maintain its existing copper network and offer token DSL and FiOS expansion in some unserved rural communities.

“We have heard our customers’ concerns in South Jersey and are pleased to have reached an agreement with the approval of all 17 towns on a maintenance plan going forward,” said Ray McConville, a Verizon spokesman. “We look forward to staying in regular communication with the towns to ensure our customers continue to receive the level of service they expect and deserve.”

“While the Board was fully prepared to proceed on this matter, the parties were able to reach a negotiated settlement which takes into consideration the needs of each community,” said Richard S. Mroz, president, N.J. Board of Public Utilities.

But some residents of those communities beg to differ.

“It’s another example of Chris Christie’s hand-picked regulators letting Verizon off the hook and sticking us in a digital divide,” complained Jeff Franklin, a Verizon DSL customer in Cumberland County. “Verizon should not be allowed to offer one half of the state modern broadband while sticking the rest of us with its slow DSL service.”

Franklin is upset that communities bypassed by Verizon’s FiOS network appear to have little chance of getting it in the future, now that regulators have agreed to allow Verizon to fix its own copper network.

“All the Board did was force Verizon to do what it should have been doing all along, taking care of its own network,” Franklin complained to Stop the Cap! 

Verizon did agree to expand its fiber network into the communities of Estell Manor, Weymouth Township, Corbin City, and Lower Alloways Creek Township, but only because of a 2014 agreement with Verizon compelling them to offer broadband to residents who read and complete a “Bona Fide Retail Request” (BFRR) form which stipulates homes and businesses in Verizon’s New Jersey territory can get broadband if they don’t have it now as long as these criteria are met:

• Have no access to broadband service from a cable provider or Verizon;
• Have no access to 4G-based wireless service; and
• Sign a contract for at least one (1) year of broadband service and pay a $100 deposit.

“BFRR is a joke because it requires potential customers have no access to 4G wireless service,” claimed Franklin. “You have to go to the government’s National Broadband Map to determine eligibility, which is very tough because — surprise, surprise — Verizon itself contributed its 4G wireless coverage information for that map and as far as Verizon is concerned, their 4G coverage in New Jersey is beautiful, even though it really isn’t.”

If a single provider submits map data that shows a home address is already covered by 4G wireless service, even if that isn’t accurate on the ground, that customer is ineligible under the terms of BFRR. Even if they were able to subscribe to 4G broadband, most plans are strictly data capped or throttled.

Under the settlement, Verizon gets to choose what technology to deploy. Outside of the four communities getting FiOS, the rest of South Jersey will have to continue relying on Verizon’s DSL service. Verizon has agreed to extend DSL to 2,000 new residences and businesses in Upper Pittsgrove, Downe, Commercial, Mannington, Pilesgrove, and South Harrison. It will also fix some of its DSL speed congestion problems and monitor for future ones as part of the settlement.

But DSL won’t work if Verizon’s wireline network stays in poor shape. The company has agreed to deploy its “Proactive Preventative Maintenance Tool” (PPMT) to scan its copper network to identify and repair or replace defective cables. Verizon has also agreed to daily inspections of outside facilities and fix any detected problems within 30 days, as well as regularly reporting back on the condition of its infrastructure inside the towns affected under the settlement.

This agreement took a year and a half to reach and will keep the two parties out of court, but many are not satisfied being left with Verizon’s DSL service.

“Unfortunately, the BPU continues to allow Verizon to pick and choose which residents will receive modern telecommunications at an affordable cost,” Greg Facemyer, a Hopewell Township committeeman in Cumberland County, told NewsWorks. “The state legislature needs to recognize these inequities and step in and level the playing field for South Jersey. Otherwise, our region will continue to fall even farther behind and be less competitive.”

Verizon has announced near-gigabit speeds will soon be available to its FiOS customers in eight markets starting April 30th at prices as low as $69.99 a month.

The new speed tier will cost less than half of Verizon FiOS’ currently advertised 500/500Mbps plan, and less than the 750Mbps plan some customers have been able to buy during the last three months in select cities.

FiOS Gigabit Connection will not actually deliver 1,000/1,000Mbps service, but it will come close with download speeds up to 940Mbps and 880Mbps for uploads.

Current FiOS customers will be able to upgrade their internet speed and see a dramatic bill reduction starting April 30, according to a Verizon representative.

Unfortunately, all Verizon FiOS customers will not be able to take advantage of the upgraded speeds and lower prices immediately. For now, only customers in the following areas qualify:

• New York (City and immediate suburbs)
• Portions of Northern New Jersey
• Philadelphia
• Richmond and Hampton Roads, Va.
• Boston
• Providence, R.I.
• Washington, D.C.

Pricing will depend on the level of service you have. Equipment rental, taxes and fees are not included. Customers must order online to get this pricing:

• Standalone (non-promotional/never expires): $69.99/mo
• Triple-play bundle price: $79.99/mo, rising to $84.99 in year two

Customers in the qualified markets noted above currently subscribed to Verizon’s 750/750Mbps plan ($150/mo) will be transitioned to the new gigabit plan automatically and get a lower bill as well.

As FiOS Gigabit Connection is introduced, Verizon will dramatically cut the number of internet plans it offers customers in areas where gigabit speeds are available. Verizon is expected to drop its 100, 150, 300, 500, and 750Mbps tiers, leaving just two — an entry-level 50/50Mbps plan starting at $39.99 and the gigabit plan for just under $70.

In other cities where gigabit speeds will not be available for now, customers are stuck with lower speeds and higher prices. Verizon does not have a timetable when other cities will receive upgrades at this time.

FILE PHOTO: The logo of Verizon is seen at a retail store in San Diego, California April 21, 2016. REUTERS/Mike Blake/File Photo

(Reuters) – Verizon Communications Inc on Thursday reported its first-ever quarterly loss of subscribers, even as it offered an unlimited data plan, raising questions on whether the No. 1 U.S. wireless carrier may need a larger acquisition than Yahoo to diversify its business.

Verizon has been struggling to fend off smaller rivals T-Mobile US Inc and Sprint Corp in a maturing market for U.S. wireless service, and in February offered an unlimited data plan for the first time in more than five years.

While it has pursued other revenue streams, including a $4.48 billion deal for Yahoo Inc’s core business, analysts have questioned if it should pursue a more transformative combination.

“We continue to believe that the company needs a strategic transaction to support their wireless business for the long-term,” analysts at New Street Research said in a note.

Meanwhile, Verizon’s main competitor AT&T Inc plans to diversify its business through an $85.4 billion acquisition of Time Warner Inc, which would give it control of cable TV channels like HBO and other coveted media assets.

Verizon’s shares were down 1.2 percent at $48.33 in midday trade.

Earlier this week, Verizon Chief Executive Lowell McAdam said in an interview with Bloomberg News that he is open to deal talks with companies ranging from Comcast Corp to Walt Disney Co.

On Thursday, Chief Financial Officer Matthew Ellis clarified the comments, saying that while the company would consider deals that are in the interest of shareholders, it is confident in its assets.

“The ecosystem is constantly changing, and if there’s somebody who comes to us with an idea of how we can kind of leapfrog forward in that environment, we’re going to listen to them,” Ellis said in an interview with Reuters. But he added, “We are very confident with the strategy that we have.”

In the first quarter, Verizon said it lost 307,000 retail postpaid subscribers or those who pay a monthly bill. Analysts on average were expecting net additions of 222,000, according to market research firm FactSet StreetAccount.

Churn, or customer defections, among wireless retail customers who pay bills on a monthly basis, increased to 1.15 percent of total wireless subscribers, compared with the average analyst estimate of 1.03 percent, according to FactSet.

Ellis noted that churn rose in the first half of the quarter but came down in response to the relaunch of unlimited plans. “It really was a tale of two halves,” he said.

But analysts viewed the results as disappointing.

“They badly missed on every important subscriber metric, and it just underscores that the wireless business is a severely growth-challenged business at the moment,” said Craig Moffett, an analyst at MoffettNathanson in an interview.Net income attributable to Verizon fell to $3.45 billion, or 84 cents per share, in the first quarter ended March 31, from $4.31 billion, or $1.06 per share, a year earlier. Excluding items, earnings per share was 95 cents.

Total operating revenue fell to $29.81 billion from $32.17 billion a year earlier.

According to Thomson Reuters I/B/E/S, analysts had expected adjusted earnings per share of 99 cents and revenue of $30.77 billion.

(Reporting by Anjali Athavaley in New York; Editing by Saumyadeb Chakrabarty, Bernard Orr).