Verizon could gain 1M fixed 5G customers by next year, analysts predict

Samsung
Samsung is supplying equipment for Verizon's fixed 5G services. (Samsung)

Verizon is clearly heading into uncharted waters. The company later this year plans to use 5G technology to offer fixed internet services to homes and offices in four U.S. cities. The gambit stands as a major challenge to Comcast and Charter Communications, which are currently the incumbent providers in those locations.

But how exactly will Verizon perform in those cities with an untested product against wireline providers that already offer blazing-fast wired internet services?

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One Wall Street analyst firm has a prediction: “If execution exceeds FiOS’ we expect they could achieve ~10% penetration within the first year or ~1.0m subs,” wrote the analysts at Macquarie Research in a recent note to investors.

The analysts explained that Verizon roughly 10 years ago embarked on a FiOS fiber network buildout in part to challenge existing cable providers with faster, fiber-based internet speeds. Now, Verizon’s new fixed 5G effort essentially stands as a renewed effort to challenge cable providers with an internet service targeted at homes and offices but delivered through a wireless connection instead of a wired connection.

This time, though, things are different.

“Verizon is taking a page out of the FiOS playbook and is being smart about its ‘smart city’ effort. Its FiOS deployment was met with long/messy municipality approval processes. LA, Sacramento, Houston and Indianapolis were picked based on fiber access, topography, population density, ease of municipal approval and competitive landscape,” the analysts wrote in their report.

Verizon has said that it will use 5G technology to launch fixed wireless services in four U.S. cities—Los Angeles, Sacramento, Houston and Indianapolis—later this year. The company has said it will eventually offer fixed wireless services to 30 million households, a goal the Macquarie analysts said Verizon will reach by 2024. Verizon has said it will use its 28 GHz spectrum to beam 1 Gbps 5G signals up to 2,000 feet to homes, offices and other fixed locations in those cities.

RELATED: Editor's Corner—With 1 Gbps speeds, Verizon’s 5G fixed wireless service will leapfrog the competition

However, the Macquarie analysts noted that Verizon “faces an uphill battle.” The firm said that, based on its proprietary survey, fully 64% of respondents said they would not pay a premium to cable for Verizon’s 1 Gbps 5G wireless internet service.

Thus, Verizon may not find many customers willing to switch from cable to its 5G service unless they find something compelling about the offer. Already, Comcast and Charter are offering 1 Gbps services in locations like Los Angeles, Indianapolis and Sacramento.

For its part, Verizon has been working to juice its 5G offering with the inclusion of YouTube TV or Apple TV. That offer is intended to provide a video service alongside Verizon’s 1 Gbps fixed wireless internet service—and to stand as an alternative to Charter and Comcast, which both offer video services.

Verizon hasn’t provided details about how it will sell video over its fixed wireless internet service. The company has said only that it will offer customers either a YouTube TV account or a Apple TV device, and hasn’t said how long customers must subscribe to those services on order to obtain service.

To be clear, fixed wireless internet services are just a part of Verizon’s larger 5G plans. Verizon has said that, roughly six months after it launches fixed wireless internet services, it will launch mobile 5G services in locations across the country. Indeed, along those lines, Verizon this week announced that it tested a mobile 5G call using equipment from Qualcomm and Ericsson.

But Verizon hasn’t provided details about its mobile 5G launch plans.