Verizon sees refarming as ‘a capacity solution where the company lacks AWS-3 spectrum’: Jefferies

Verizon sign
Verizon continues to refarm its spectrum for LTE to meet increasing demand.

Verizon executives are confident the carrier can refarm its spectrum to meet increased demand in the era of unlimited data, according to Jefferies Equity Research Americas.

The nation’s largest mobile network operator generated headlines last month when it made some major changes to the $80-a-month unlimited plan it introduced just six months ago, dividing it into three tiers and capping video transmission speeds to lighten the network load. The new basic plan starts at $75 a month for a single line but caps video streaming at 480p on smartphones and 720p on tablets, and enables the operator to reduce speeds at any time if the network is congested.

T-Mobile cited a report from Ookla in July that indicated data speeds on the networks of both Verizon and AT&T had slowed since both operators launched unlimited data plans.

But Mike McCormack of Jefferies, who recently met with members of Verizon’s investor relations team, said Verizon believes it will be able to keep pace with increasing demand for mobile data by continuing to convert older airwaves for LTE use.

“Management was confident in the company’s strategy of focusing on next-gen platforms, with fiber builds and wireless densification key strategic initiatives,” McCormack wrote in a note to investors. “5G initially, will be a fixed wireless platform, and the company is confident in the ability to deploy on millimeter wavelength spectrum bands, with standards likely set for 4G to 5G handoffs. It is expected that 4x4 MIMO will be available in the new iPhone, and refarming will be a capacity solution where the company lacks AWS-3 spectrum.”

Verizon’s licenses for millimeter-wave holdings will increase significantly if it finally closes on its $3.1 billion acquisition of Straight Path, but that deal continues to face regulatory hurdles. And the carrier will have to continue to use small cells to densify its network and may have to make another acquisition to meet demand in the era of unlimited data.

And at least one industry insider has questioned whether Verizon truly has enough spectrum that can be refarmed for LTE.

“The other obvious, and probably more important, takeaway from Verizon’s new rate plans is to once again raise questions about the state of Verizon’s network. (Earlier this month, we profiled how Verizon converted additional spectrum from CDMA to LTE, leaving it with only 20 MHz left to convert in this important market),” Walter Piecyk of BTIG Research wrote last month. “It’s unclear why Verizon remains resistant to a Dish spectrum acquisition given the slow pace of small cell deployments. Perhaps increased pricing and more throttling can buy Verizon more time to deploy the small cells that are needed to sustain network quality.”