Verizon's Shammo: LTE capacity issues will be worked out by year-end

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Verizon Wireless (NYSE:VZ) is currently experiencing higher than expected LTE data traffic and network stresses in a few major markets, but expects to have those issues ironed out by year-end, according to Verizon Communications CFO Fran Shammo.

Speaking at the Wells Fargo Tech, Media & Telecom Conference, Shammo said that in Chicago, New York City and San Francisco, Verizon is experiencing some capacity issues. However, he said the company is mitigating the problems through the deployment of small cells, Distributed Antenna Systems and its AWS spectrum.

"The amount of consumption of video took us a little bit by surprise," he said. However, now that Verizon's LTE coverage buildout is complete, Shammo said "all of my effort is around capacity." As each week goes by, the issues get smaller and will "dissipate" by year-end, he said. Verizon has previously said it would deploy AWS spectrum on 5,000 cell sites by year-end.

In October, Verizon confirmed it had started deploying LTE in its AWS spectrum to boost capacity in key markets. In many markets where it is deploying AWS spectrum, Verizon will be able to use 20x20 MHz channels; wider channels allow for faster speeds. In some markets it will have smaller than 20x20 MHz channels.

At the end of the third quarter, 38 percent of Verizon's customers were on LTE and generated 64 percent of its data traffic. Shammo said in certain markets the figure is much higher than 64 percent. "When we start to move 3G smartphones to 4G, the consumption really increases," he said.

Looking ahead to next year, Shammo said Verizon is excited about Voice over LTE and LTE Broadcast, which it intends to demonstrate at the Super Bowl. Shammo said devices with chipsets capable of taking advantage of LTE Broadcast technology will start shipping in the fourth quarter, but that it will take some time to seed the postpaid base with such devices.

The focus of Verizon Wireless, which Verizon expects to take complete control of early next year thanks to its $130 billion deal with Vodafone, will be on growing service revenue and average revenue per account, or ARPA. Shammo said those figures will be driven by increased device attachment rates to Verizon's Share Everything shared data plans, increased consumption and greater M2M growth.

At the end of the third quarter, 42 percent of Verizon's postpaid accounts were on Share Everything plans, with 35 million accounts and 2.72 connections per account. Shammo said adoption of tablets has been significant: He said that 40-50 percent of all tablet sales a year ago were postpaid; now, almost all are.

Shammo was asked about Sprint's (NYSE:S) forthcoming tri-mode LTE service, which it has dubbed "Sprint Spark." Sprint has said the service, which combines 800 MHz, 1.9 GHz and 2.5 GHz LTE spectrum, will come to the top 100 U.S. markets during the next three years with speeds capable of reaching 50-60 Mbps and perhaps faster.

Shammo said "they're going to build out their network the way they're going to build out their network," but that all carriers use the same standards for LTE, which delivers average downlink speeds of 8-12 Mbps on a fully loaded network.

The Verizon executive also touched on the company's 700 MHz A Block spectrum, which it has not yet sold after putting it on the block in 2012. "If a transaction makes sense, then we'll execute the transaction," he said. "If it doesn't, then we'll deploy it."

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