Sprint and Verizon seek to work with ‘5G cities’ to speed densification

Sprint and Verizon have both been providing more details about the practicalities of their densification programs, while piling pressure on US municipal authorities to make it easier for operators to access sites and infrastructure for 4G or 5G small cells.

Tarek Robbiati, Sprint’s CFO, has been one of the most vocal wireless executives about the need to make outdoor small cell deployment easier, cheaper and more scalable.

He has argued that local authorities can help lower barriers by opening up their sites and removing the red tape that currently surrounds permits and approvals for those locations, and for mobile equipment installation. But despite enthusiasm for smart city programs in many parts of the US, some states have proved hostile to the FCC’s attempts to set national rules and processes, jealously guarding their autonomy.

The biggest blow came in October when California governor Jerry Brown vetoed a state bill which would simplify the process of installing small cells, saying cities should be able to manage their own rights of way. In the wake of that decision, the majors of nine Chicago area cities said they opposed a state law to streamline processes for siting and deploying small cells, while all six Chicago area counties are also opposed.

Ray LaChance, CEO of ZenFi, which is building a dense dark fiber network in New York and New Jersey to support small cells on a wholesale basis, told a recent conference: “Our number one and number two costs are franchise fees and real estate taxes — a huge portion of our costs go there,” added that pole attachments in New York City can cost $400 each. “Cities say they want broadband access for everyone, but when you look at their policies, they are counter-intuitive. We would like to see some kind of homogenized franchise view, with free access to public assets,” he added.

Earlier this month, Sprint’s outgoing COO, Guenther Ottendorfer, said: “It takes a technician an hour to deploy a small cell, but it takes a year to obtain the permit. We would like to see all states pass small cell legislation (about 12 have already done so)”.

However, Robbiati says Sprint’s deployment is accelerating and that its recently agreed MVNO deal with cable operator Altice will enable it to cut through some of the red tape.

He told an investor conference last week: “We had a very positive negotiation [with Altice] because we looked at a very different model, a model where both companies leverage their own assets to deliver what’s important for the other company. And so in negotiating with Altice, what was important for us, was to gain access to their backhaul for macro tower backhaul needs. Equally it was also important to us to have the ability to deploy our own cell site hardware in the infrastructure over air strands. So we’ll build small cell sites in their footprint that will hang over aerial cable. It doesn’t involve permitting. So there is a time-to-market element that is really valuable to us.”

Robbiati also said that Sprint aims to deploy “a few thousand towers” over the next two years as it increases its capex spend – after slashing it over the past couple of years – thanks to an increased injection of funds by parent Softbank. This will help it to narrow its 4G network and revenue gap with the three larger MNOs, spending between $5bn and $6bn in fiscal 2018 – three times the 2016 sum. The CFO said that higher level would probably be maintained in 2019 but that Sprint would still break even in terms of free cashflow at that time.

“So, if you look at our operating cashflow, we generated $3.2bn in the first half [of fiscal 2017],” Robbiati told the investors.. “The whole of last year we generated $4.2bn. This year, from a capex standpoint, we are targeting $3.5bn to $4bn of capex, which is $2bn more than the prior year. So we have the headroom to invest more. Next year it’s going to be a similar story … We are equipping ourselves from a financing standpoint to be able to manage the impact that capex investment will have around cash.”

Densification, accompanied by some macro expansion, will be the main strategy, though even the new macro towers will be for “neighborhood expansion” of capacity within the existing footprint rather than a significant increase in coverage. Tri-band support will be added to all macro sites and many will be boosted with Massive MIMO over the coming few years.

Meanwhile, Verizon’s Ed Chan, SVP of technology strategy and planning, told a Barclays investor event last week that the telco wants to go after “a set of cities” for its initial 5G launch, which could be considered “5G cities”. Verizon will launch the first commercial 5G services – delivering residential fixed-only wireless at first on pre-standard equipment – in three to five markets next year, starting with Sacramento, California. In selecting the first cities, Chan the right approach by the municipal authorities was as important as the actual location, while the results of market trials were also a key consideration.

“We wanted to go after a set of cities that could be highlighted as 5G cities,” he said, with the right density and the most progressive authorities.

The first 5G services will be in 28 GHz millimeter wave spectrum, and Chan said this equipment would be overlaid on existing 4G sites rather than deployed in a brand new network, in order to reduce costs and provide 4G mobility and coverage for the fixed wireless users, before a fully mobile, wide area 5G network is created.

Verizon has so far conducted trials in 11 US markets, but Chan said “it would be practically silly for us to predict all of the applications” that will emerge. Instead, he said the ethos was “let’s get out there and build a network”, and the applications will come.