Verizon: 5G launch will feature proprietary equipment and a new OTT video service

Verizon’s management responded to a bevy of analyst questions about its pending launch of 5G wireless services later this year, and they largely stuck to the company’s previously disclosed talking points on the topic. However, CFO Matt Ellis did reiterate that the carrier isn’t planning to increase its network spending to build out a 5G network, that it will use its own proprietary equipment for the initial launch, and that it will offer a “compelling” video service alongside its 5G internet service.

“We’re very much on track” to launch fixed 5G services in three to five markets later this year, Ellis said this morning during Verizon’s quarterly conference call with analysts, many of whom raised questions about the operator’s overall 5G strategy and expectations.

“All of those markets will launch in the second half of this year,” Ellis confirmed, noting that the carrier has only named Sacramento as one of the locations where it will launch 5G services this year, despite having tested the technology in 11 different cities.

"We have moved into the deployment phase for the residential broadband launch in the second half of this year,” he added, noting that "earlier this month, we performed successful, end-to-end 5G data sessions in these locations using commercial equipment that will be deployed in the launch later this year."

Importantly, Ellis reiterated that Verizon’s 5G service will initially run on the carrier’s V5GTF standard, which deviates slightly from the 5G standard released by the 3GPP late last year.

“The launch this year will be on our proprietary standard,” Ellis stated. “This gives us the opportunity to get a product out in the market before others and to demonstrate that millimeter wave [spectrum] does exactly the things that we've said it does. But obviously over time we want to move to the standards-based CPE [customer premises equipment]. We expect to be getting that CPE based off of the [3GPP’s] NR standard probably in 2019. What I would say is that the network is being prepositioned to be able to launch 5G as soon as customer equipment is ready, whether that be in-home CPE for residential broadband or whether that be handsets for 5G mobility. We'll be ready as soon as the equipment is ready on the global standard."

Interestingly, Ellis was questioned about Verizon’s forthcoming streaming video service, which the carrier has been discussing for almost a year. Ellis said the operator continues to work on an over-the-top (OTT) streaming video service that it will provide over its 5G internet offering.

“We've got that underway,” he said. “We continue to look at OTT options, and as we've said previously, we're not looking to launch a me-too product. But, certainly, we expect to have an overall product offering to consumers in those three to five markets that will be compelling and meet their needs."

The addition of a streaming component to Verizon’s planned 5G launch is noteworthy considering AT&T currently offers its DirecTV Now streaming service to its mobile customers and is also planning to launch a new service called AT&T Watch that it will offer for free to its mobile customers in the coming weeks.

Ellis added that Verizon’s 5G efforts will not require a massive increase in its network capex; the carrier said it remains on track to spend between $17 billion and $17.8 billion this year on its network, a figure that includes the commercial launch of 5G. That spending does not represent an increase over prior years.

"You should expect to see [capex] spend in additional cities to be underway by the end of the year, so that we're in a position to launch additional geographies in 2019. But that's within our current capex guidance,” he said. “This really comes back to the design of the network over the past few years. By densifying the 4G network, we've put a lot of the infrastructure in place that we need to deploy 5G, especially by using millimeter-wave spectrum. So, we don't see this as being a massive uptick [in capex]. This is not the same thing as when we adopted 4G and went from a CDMA-based 3G network to a 4G LTE network. This is a very different network rollout than we've seen in the capex going forward.”

Ellis also addressed questions around 5G being used for fixed wireless service and mobile service. Verizon has said that it will initially offer fixed internet service for homes and offices in the three to five markets that it will launch in this year, but the carrier has also said it will be able to launch mobile 5G services from the same equipment.

“We can launch 5G mobility on our existing assets,” Ellis said, noting that Verizon won’t need to purchase additional spectrum to offer mobile 5G services. “We are comfortable that we can launch 5G mobility with the assets that we have. 5G mobility will be initially very much heavily focused on urban areas, and we have the assets in place there and we will be ready to launch as soon as the OEMs have handsets available with 5G chipsets in them.”

Finally, Ellis said Verizon will participate in FCC spectrum auctions where it believes it needs spectrum, though he didn’t provide any specifics on the topic. “We will certainly take a look at any auction that comes up, and if it makes sense to participate we will,” he said. “And if it doesn’t, then we have other avenues to continue to deploy our networks and meet the needs of consumers.”

The FCC has scheduled 28 GHz and 24 GHz spectrum auctions to start in November.