Are 5G Coverage Issues a Harbinger of Change Coming?

Verizon has been all over the news, and not for good reasons. Their financial results for Q2 were mixed, and the issues revealed after the earnings call have been controversial.

In a note to investors, Craig Moffett called out Verizon's C-band problem, describing their network as "full of holes." This spurred a spate of articles about how C-band is not performing to the hype and how 5G connections are rarely available despite the billions of dollars spent on 5G spectrum licenses.

However, I don't want to opine on Verizon's problems as much as on the implications their experience has for the industry when we start talking about "mid-band spectrum."

How Did We Get Here

Spectrum is probably the most essential element of running an effective wireless business. It determines the experience you can provide and what your radio access network (RAN) needs to look like to deliver that experience.?

The fundamental reason behind this point is well documented. Simply said, lower frequencies travel further and penetrate buildings better than higher frequencies. It's physics and if you can deliver the same or better experience at a lower cost, you can build an economic advantage.

That simple fact makes a spectrum portfolio one of the most important strategic elements of a wireless operator’s business.

Thus, how you compare with your competitors for similar types of bands makes all the difference, and this is where the articles I mentioned earlier come into play.

The 3 GHz Band

As we moved to 5G technology, the industry was looking for a frequency that wasn't too low, which lowered channel sizes, or too high, which impacted propagation. A “Goldilocks” band that was just right.

The answer was the 3 GHz range, extending from roughly 3 to 4 GHz. This 1 GHz range became all the rage when it came to setting up 5G spectrum across the globe. In fact, in the following chart from the American Tower's Q4 2023, "U.S. Technology and 5G Update," you can see where 5G is being deployed, and, as expected, it's all in the 3 GHz band (noticed the column of green blocks).

The Core of the Issue

In the U.S., AT&T and Verizon are deploying 5G in this 3 GHz band, specifically around 3.7 GHz and up. Conversely, T-Mobile uses the 2.5 GHz band, which they acquired during the Sprint acquisition. Given T-Mobile is deploying at about 1 GHz below AT&T and Verizon, this can give them a coverage benefit.

According to OpenSignal, T-Mobile customers are able to get a 5G signal almost 70% of the time. For AT&T and Verizon, these numbers were incredibly low (11.8% and 7.7%, respectively). Honestly, there are many other reasons these numbers could be low but the magnitude of the difference creates a customer perception problem. According to Craig Moffett, Verizon's coverage is full of holes!

Most customers wouldn't be able to tell the difference if they were using a 5G or 4G LTE signal. When we use most applications on our phones, a 4G LTE signal provides plenty of speed and capacity with room to spare.?

The problem is that little 5G logo that appears on your phone in the upper right corner when you have a 5G connection. Why? Many operators are trying to tout a value proposition based on 5G, and if you can't maintain that logo, customers are going to question what they're buying.?

While the lack of a 5G signal may not actually affect performance, if you’re trying to claim you are a 5G leader and paying tens of billions of dollars for spectrum and network, your customers better see “5G” whenever they can.?

The Real Issue

As I noted, there are various reasons why the 5G logo isn't appearing on a phone at times, and those reasons are not just due to spectrum. However, if there is any truth to the claim that the high-value band like the C-band has holes in it, what does this mean for the industry at large?

Importantly, there are essentially no large spectrum blocks below 3 GHz left in the U.S. for mobile services. The entire National Spectrum Pipeline begins at 3 GHz but focuses on bands at 7, 8, and 12 GHz as the next bands, which will likely become the "6G" standard.

The fundamental problem is this: Our entire industry is built on a network deployment model that is becoming more expensive to deploy over time, not cheaper!

A Phased Approach to Change

In short, something will have to change. The model isn't sustainable. Given the industry's general malaise, operators will likely continue to "go slow" on 5G. However, operators ultimately have to invest in their networks to maintain any performance advantage.?

That said, the historical approach to building networks will not be sustainable over the long term. The industry does not move fast, so I expect it to evolve over three phases.?

As I say with every forecast presentation I make, I like to quote the great Yogi Berra, who is credited with saying, "Predictions are hard, especially about the future." Thus, a lot of these may be wrong, but the direction is likely very right.

Phase I (Next 3 to 4 years)

We’re in a down cycle of wireless capital spending. That situation can’t sustain itself, and I don’t expect a silver bullet in the network deployment model any time soon. Thus, we can expect to return to some level of sustainable investment in the network in the coming years.?

As that occurs, we could see a higher frequency spectrum emerge from the pipeline; in contrast, nothing really appears. Either approach leads to the same outcome: more densification of the network (small cells, macro splits, etc.). With a dearth of any major spectrum in the pipeline and continued exponential demand growth, expect more innovation in spectral efficiency to help offset how much densification is required.

While this result can be a net positive for all of the construction firms and OEMs that are hurting at the moment, I expect we’ll see more operators toy with alternative deployment models. These could be extenuations of deployment models like those we’ve seen with Bitcoin mining, like Helium. They won’t be enough to move the needle, but these models will give the industry valuable experience.

Phase II (Medium term – 5 to 8 years)?

Over the next few years, I expect operators to begin attacking every possible cost to lower deployment capital. That said, during this time, we will see the next air interface standard (whatever “6G” means) emerge. When this happens, all operators who do not have software-defined radios will likely start to deploy them at scale.?

This is a fundamental and critical step to lowering one of the biggest costs for the wireless RAN by making them software upgradeable in the future. It also means we may finally see some version of Open RAN “at large” across all the operators, not just Echostar.

Thus, Phase II may see another capital investment, but the key point is this is an investment to change the model.

Phase III (Long term – 8+ years)

Looking at the longer term, it's a bit harder to predict, as Yogi Berra said. However, two very fundamental questions could yield a markedly different wireless business than what we have today:

1. Which parts of the wireless network does the operator really need to own and control?
2. Do remote communications always imply traditional RF technology?

I'm totally stretching here, but our industry's deployment model is built on the premise that the operator has to own the entire network based on the RF models we have today. If the deployment model isn't sustainable, it suggests (at least to me) that something has to change. We've already seen this shift in venue and in-building coverage, where other companies are stepping up.?

Maybe it's time network sharing is on the table. Maybe there's a blurring of public/private networks. Maybe the network becomes based on laser-based technologies that can propagate hundreds of miles. Who knows?

The point of this entire (albeit wide-ranging) article is that what we observe today—spectrum propagation problems, operator economics, spectrum pipelines—are harbingers of what's to come. This understanding is essential to any thoughtful entry, growth, or investment strategy.

What do you think the future of network deployment looks like?

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