Verizon: We'll hit LTE capacity limit in some markets by 2013 without new spectrum

Verizon Wireless (NYSE:VZ) expects data traffic on is LTE network to exceed that of its CDMA EV-DO network in early 2013--and believes traffic will only keep ballooning from there, according to a recent FCC filing Verizon made.

The insight into Verizon's data projections is only one of a handful of key forecasts Verizon has made about how it plans to tackle rising data traffic in the years ahead. Verizon divulged the details as part of a wide-ranging filing made in support of its planned $3.9 billion purchase of nationwide AWS spectrum licenses held by SpectrumCo, a joint venture of cable companies Comcast, Time Warner Cable and Bright House Networks, as well as AWS holdings from Cox Communications.

In the filing, Bill Stone, Verizon's executive director of network strategy, said that Verizon's current spectrum holdings "will not provide sufficient capacity to meet the growing demand for mobile broadband--4G, in particular--by 2013 in some areas and by 2015 in many more." Verizon noted that its LTE network, which covers 200 million POPs, provides 60 percent more spectral efficiency than its EV-DO network, but even that will not be enough. Only around 5 percent of Verizon's customer base currently uses LTE services, but the company is rapidly trying to migrate as many customers to LTE as possible.

"Our usage projections suggest that traffic on our LTE network will surpass data usage on our EV-DO network in early 2013," Verizon's Stone stated. "By year-end 2015 our LTE data traffic is projected to be 5 times the peak data traffic ever carried on our 3G EV-DO network. The impact of that growth rate compounds, resulting in a more than 20-fold increase in LTE data traffic from year-end 2011 to year-end 2015."

To cover that gap, Verizon will continue to add additional cell sites, deploy the LTE Advanced standard, modify existing cell sites with new antennas and other equipment as well as deploy its AWS spectrum holdings. Verizon currently owns 20 MHz of AWS spectrum, mainly covering the Eastern United States. "However ... technology advancements we will deploy in the network, along with use of the AWS spectrum we currently hold, are insufficient to meet future demand, and additional spectrum is required," Stone stated.

Peter Jarich, an analyst with Current Analysis, noted that all carriers have their own projections for how fast data will grow, but also said that carriers have options to expand capacity beyond buying new spectrum. "All the operators in the world can get away with a lot less spectrum depending upon whey do with the network," he told FierceWireless, noting that they could build out smaller cell sectors, for example. "There is always that tradeoff: What can you do more cheaply with more spectrum than you can do with more equipment."

Some carriers are refarming spectrum in order to address capacity concerns, but Stone said Verizon can't immediately use that strategy. "Transitioning Verizon Wireless' PCS and cellular spectrum from EV-DO and voice services to LTE is not a realistic alternative to address the significant and pervasive networks constraints we will face over the next few years," Stone stated. "As an initial matter, overall traffic continues to increase on the EV-DO network even as some customers migrate to the LTE network. Thus while traffic is migrating to LTE, spectrum deployed for EV-DO is not fallow, but is filled by the growing data demands of remaining users. Put another way, customers are not yet moving to LTE fast enough to stop, and reverse, EV-DO traffic growth."

Verizon's statements about growing data traffic--made to convince regulators to approve its purchase of spectrum from cable companies--are similar to the arguments AT&T (NYSE:T) made to the FCC last year in AT&T's failed $39 billion bid to acquire T-Mobile USA. AT&T argued it needed T-Mobile's spectrum to meet users' demands for data. Since the collapse of its deal, AT&T has acquired Qualcomm's (NASDAQ:QCOM) Lower D and E Block 700 MHz MediaFLO spectrum licenses for $1.93 billion, and has started indicating it will refarm its 2G 1900 MHz spectrum.

In a somewhat related development, Verizon announced a new LTE product, called HomeFusion Broadband, which is intended to replace home Internet connections. The antenna product, which costs $200, must be installed outside a customer's home, which Verizon will do for free. The product launch comes after Verizon conducted trials for a similar device last year, which it dubbed a "Cantenna" at the time. Verizon will charge $60 per month for 10 GB, $90 for 20 GB and $120 for 30 GB, and the company hopes to offer HomeFusion in all its LTE markets by year-end (see this related article in FierceCable). 

For more:
- see this FCC filing (PDF)

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