On Verizon’s first-quarter earnings call, EVP and CFO Matt Ellis revealed that 800,000 customers had informed the company that they intended to avail themselves of the FCC’s Keep Americans Connected pledge, which, among other things, asks service providers to keep customers connected if they can’t pay their bills due to the COVID-19 crisis.
While he did not update that number during an appearance at the MoffettNathanson 7th Annual Media & Communications Summit today, he said that’s less than 2.5% of the total customer base. Compared to other industries, like paying for home mortgages, that’s pretty good.
“We’re seeing a continuation of trends we’ve seen in prior economic downturns, where people are electing to pay their phone bill and we’re continuing to see that right now. Certainly there are some impacts, but we’re seeing some good trends as well within the payment space,” he said. “We have a very good process for helping customers stay as Verizon customers,” even when they face economic difficulties.
With the newly merged T-Mobile and Sprint, Verizon gets a new competitor with a sizable 2.5 GHz mid-band spectrum play. But Ellis said while the newly combined T-Mobile/Sprint has those assets, it takes two to three years to do the network integration, and that’s if it’s done right. “There’s a lot of work to do there,” putting that portfolio together.
As for Dish Network entering the market as the new fourth service provider, “we’ll have to see exactly how that gets built out. Dish has owned spectrum for a long time,” and they haven’t done a lot with it. “We’ll see how that goes from here.”
Like everything that happens in the industry, Verizon is paying close attention. “While we have been the leader, we also don’t take that for granted,” he said. “We know there’s always people out there trying new things” and you never know when someone will come up with something that makes an impact.
Dish has estimated the cost of its network to be $10 billion, and “we spend a little more than that annually” on the network and that’s mostly to maintain it and put in new generations as opposed to the initial buildout. “We’ll watch it very closely,” he added.
One might assume that with the pandemic and shifting priorities, the enterprise space might be less inclined to spend on 5G. But Ellis said the enterprise sees 5G as one of the things that can make them operate more efficiently.
“We continue to work very closely with a lot of our enterprise customers on 5G, and if anything, businesses understand that they will need to get keep getting more and more efficient as we come out the other side of the current situation,” he said.
Craig Moffett, who conducted the Q&A with Ellis, has been a well-known skeptic of Verizon’s 5G strategy and its emphasis on millimeter wave, where the ROI is unproven. Verizon has been focused on dense urban areas for deploying its millimeter wave (mmWave) 5G, including in stadiums and arenas where people are not gathering right now. He asked: Does that change the way the company thinks about capital investment priorities?
Ellis suggested the reason for going to 5G is all the functionality it offers, and the only way to get all the benefits from it is by having enough spectrum. Verizon identified millimeter wave spectrum as the place where it could get a lot of it, and that’s where it has been focused. While the propagation characteristics are different, it can offer much faster speeds.
“The usage of millimeter wave has been around how do I deliver 5G in a way that brings all the functionality” and makes 5G about what it’s really capable of doing and not just a marketing campaign, Ellis said. Verizon likes to talk about the eight currencies for 5G.
“We’re very happy with the spectrum holdings we have,” he reiterated, noting he can’t talk about the CBRS auction due to the FCC's anti-collusion rules that surround auctions. C-Band brings some incremental optionality for developing the mid-band strategy and it looks forward to that auction starting in December, he said.
Verizon plans to use dynamic spectrum sharing (DSS) technology to expand its 5G coverage – it allows it to use the same spectrum for both 4G and 5G. “It’s a great development that we’ve not had in this industry before,” and “it works,” Ellis said. Verizon is in the process of deploying it in the network and expects it to be ready later this summer, but it hasn’t publicly said when it expects to make it commercially available.
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Verizon rolled out its 5G mobility service in 31 markets last year and it expects to do another 30 markets this year. As it builds those markets out and increases coverage, it can reach more residences and then can offer the 5G Home product, which currently is offered in only five markets.
One of the things it’s been waiting for on the Home product is the latest chipset from Qualcomm, which is available in some handsets now and they’re going to get it into the CPE for the Home service later this year. That will lead to better performance and enable them to roll it out more aggressively.