Verizon taps Amazon’s Kuiper for backhaul, rural connectivity

Verizon kicked off Mobile World Congress Los Angeles with some high-flying news: Verizon is teaming with Amazon’s Project Kuiper to develop connectivity solutions for unserved and underserved communities. Initially, Project Kuiper will provide cellular backhaul solutions for Verizon’s data networks.

Project Kuiper is Amazon’s initiative to launch a constellation of 3,236 low earth orbit (LEO) satellites to serve households, as well as schools, businesses and other organizations in need of internet access in hard-to-reach places. Amazon has committed $10 billion to the program, which received the FCC’s approval last year. Amazon has yet to launch any satellites, so delivering access for Verizon on the ground is a ways off.

Still, Verizon has high hopes for the venture and expects initially to focus on expanding Verizon data networks using cellular backhaul solutions from Project Kuiper. That said, it initially will be backhaul but in areas where cellular isn’t available, even with satellite backhaul, Verizon could offer customers communications services over satellite, according to a spokesman, who stressed that it’s all a few years away and specifics on commercial applications and hardware are still to be determined.

The integration will leverage antenna development already in progress from the Project Kuiper team, and both engineering teams are now working together to define technical requirements to help extend fixed wireless coverage to rural and remote communities across the United States, according to Verizon’s press release.

“Together, Verizon 5G and Amazon's LEO satellite network can create resilient enterprise connectivity solutions. Our aim is to unlock the power of reliable connectivity for our customers, so they can fully leverage our growing ecosystem. Utilizing backhaul solutions, we can expand our connectivity even further, and complement our 4G LTE and 5G network,” said Verizon Business Chief Revenue Officer Sampath Sowmyanarayan in a statement.

RELATED: Amazon plans to invest $10B in Project Kuiper

“There are billions of people without reliable broadband access, and no single company will close the digital divide on its own,” said Amazon CEO Andy Jassy in a statement. “Verizon is a leader in wireless technology and infrastructure, and we’re proud to be working together to explore bringing fast, reliable broadband to the customers and communities who need it most. We look forward to partnering with companies and organizations around the world who share this commitment.”

The deal is non-exclusive for both parties. However, Verizon and Amazon have a history of working together – and not just on the 5G Mobile Edge Compute (MEC) front where Verizon talks at length about its work with AWS Wavelength.

Verizon points out that it’s teamed with Amazon in the little-known Voice Interoperability Initiative, a program launched in 2019 with more than 30 companies. That initiative is focused on interoperability for voice-enabled products.

Sizing up the opportunities

New Street Research analysts said they assume the partnership primarily will focus on the areas of the country that Verizon’s network doesn’t already cover. According to the latest FCC report, Verizon’s network already reaches 98% of the population by covering 72% of its landmass. That means there are 6 million to 7 million people not currently covered by Verizon’s LTE network spread over a land area of about 1 million square miles, the analysts said.

“If 50% of these people become Kuiper/Verizon customers and assuming Verizon’s phone ARPU of ~$60, there could be $2.4BN in annual revenue,” wrote New Street’s Philip Burnett in a note for investors today. “Assuming Verizon and Kuiper split the revenue (which should come at high margins), Verizon could add a dime to $0.15 to EPS (an increase of 2-3%). There may also be an opportunity to increase current Verizon customer ARPUs by providing the hybrid service at a premium (some Verizon consumers may value ubiquitous coverage in especially remote areas).”

However, the partnership may be more worthwhile for nascent enterprise opportunities than the consumer segment. “We can think of various industrial enterprises – from remote mines, to trucking companies (Verizon only covers 91% of U.S. road miles) – who may benefit from the ubiquitous connectivity resulting from the partnership, especially as those companies look to expand their own connectivity. This overlaps with the private network market that all the carriers, including Dish, are targeting. This nascent space will be competitive,” Burnett wrote.

It's also going to bring stiff competition to SpaceX and others seeking to use satellite technology to bring enhanced broadband to rural areas, he added –  a space that’s getting rather crowded by way of plans and aspirations, though it’s early days.

"Verizon’s 5G wireless network will deliver better service than satellite broadband in areas where it is available (though technological development continues to narrow the difference in consumer experience),” Burnett said.

“By partnering with Kuiper for mobility solutions, Verizon will be able to utilize its wireless network wherever it exists while falling back onto the Kuiper network in those instances where it doesn’t have sufficient coverage," he added. "By bunding ubiquitous mobility with Kuiper delivered fixed satellite broadband in areas beyond the reach of the Verizon network, the companies will offer a strong value proposition that will pose a stiff challenge to SpaceX and others targeting the unserved broadband market.”