New York and Boston are likely beneficiaries of Verizon Wireless’ plan to add capacity to its network using outdoor small cells. The carrier said there are a handful of areas in which it had hoped to increase its spectrum holdings, but will instead use small cells to densify the network.
“For the few particular markets where we would have started leveraging AWS-3 in 2017, but did not purchase the spectrum in the auction, we will be increasing our investments in capacity solutions for each of the next three years,” said Verizon Wireless CTO Tony Melone in a conference call following the end of the recent Auction 97 proceedings.
Melone did not name the markets in which the carrier plans to add small cells, but did say that New York and Boston are two markets in which Verizon Wireless did not acquire additional 1.7/2.1 GHz spectrum in the recent auction. In Boston, Verizon Wireless already has a 400 node distributed antenna system in development.
Verizon Wireless said during the same call that its $17.5 billion to $18 billion capital expenditure budget for this year now includes an incremental $500 million for network densification.
“We’ve always had the ability to drive capacity via the spectrum and technology,” said Melone. “Now that we know what spectrum is available going forward, we simply have to adjust our plans in certain places where we may have anticipated spectrum.”
Melone added that as the cost of spectrum has risen, the cost of small cell technologies has been going down. “The comparison between the two changed dramatically,” he said.
Crown Castle poised to benefit
Crown Castle has been a major developer of small cell systems for Verizon Wireless. The company is projecting roughly $260 million in small cell revenue this year, and said most of that will come from Verizon Wireless.
“The vast majority of the new activity that we’re seeing on the small cells is driven by Verizon,” said Crown Castle CEO Ben Moreland. To date, Verizon Wireless has been the company’s primary tenant on most of its small cell systems, and Moreland expects Verizon Wireless to be Crown Castle’s biggest source of small cell revenue for the foreseeable future. Eventually, however, Moreland expects all four of the leading carriers to invest in outdoor small cells.
Crown Castle currently has 14,000 small cell nodes on air or under construction, supported by 7,000 miles of fiber. The company said it continues to build out its fiber network to support small cells.
“Fiber is the horizontal tower … and small cells are fed by fiber,” said Moreland. “On occasion we have found it to be more attractive and economically efficient to actually acquire some fiber instead of building.” Moreland said this was the case last year when Crown Castle acquired 24/7 in Baltimore. “It was almost a direct overlay of fiber we were going to be building for Verizon,” he said.
Verizon Wireless highlighted the improving economics of fiber as one of the reasons that small cells are becoming a more attractive investment.
“A healthy competitive market has emerged for fiber providers over the past several years that gives us great confidence in our ability to execute on our small cell plan,” said Melone. “In addition, distributed antenna system providers are continuing to expand their already excellent relationships with municipalities and as such have become trusted partners in executing our capacity plans.”
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