Verizon is confident that its fixed wireless access (FWA) offering will not be paralyzed by capacity constraints as it adds more subscribers because the company has some advantages that other FWA providers, such as T-Mobile, do not have.
Speaking at the MoffettNathanson investor conference today, Sowmyanarayan Sampath, Verizon Consumer CEO said the company’s 30,000 mmWave spectrum cell sites provide extra capacity for its FWA business, particularly in dense urban areas. In addition, Verizon has 100 MHz of C-band spectrum that will become available later this year that it will be able to buildout and provide more capacity. Plus, Verizon has its own fiber assets that it uses for backhaul to about 50% of its cell sites, which means it doesn’t have to worry about logjams in the backhaul network. “We are comfortable with our capacity for FWA. We think it’s a sustainable long-term business,” Sampath said.
Verizon believes about half of its 2 million FWA customers are former cable broadband subscribers that have ditched cable in favor of FWA. When asked where the next million FWA customers will come from Sampath said that he believes that the company will continue to attract cable subscribers, particularly as it expands its C-band buildout to more suburban and rural areas of the country.
However, Sampath also said that Verizon isn’t interested in tightly bundling its FWA product with its mobile service rate plans similar to how the cable MVNOs are bundling their mobile services with their broadband products. For example, Charter offers plans that bundles together its home broadband service with unlimited mobile services.
“FWA is such a good business for us,” Sampath said, adding “we don’t have to cut a check to anyone else.” He also said that FWA has very low churn, similar to the company’s Fios fiber product.
Verizon’s frenemy relationship with cable
Verizon has a unique relationship with its cable partners — the company provides the underlying wireless network service to the largest cable MVNOs including Comcast’s Xfinity Mobile and Charter’s Spectrum Mobile but also is losing wireless customers to those MVNOs. Sampath called the cablecos “frenemies” and said that Verizon’s relationship with them is good. “We compete on the retail side but in wholesale we want to be the best supplier,” he said.
The cable MVNOs have been snaring more wireless net adds for the past few quarters than their wireless competitors, including Verizon. Comcast’s Xfinity Mobile added 355,000 postpaid net adds in Q1 while Charter’s Spectrum Mobile added 686,000 net adds in the quarter.
When asked how Verizon is going to compete against these MVNOs that are growing quickly and attracting new subscribers, Sampath said he doesn’t believe their run rate is sustainable.
He also downplayed Verizon’s losses to cable MVNOs saying that the company believes that they are attracting customers from other wireless providers more than Verizon. He also said that he believes a lot of their customers are “prepaid converts.”
On the topic of prepaid, Sampath said that Verizon still has about 10% to 20% of Tracfone customers that are still on other operator networks and they need to move them over to Verizon’s network. He also hinted that the company is going to expand its Total by Verizon retail business and expand it to more stores.
He also said that about one-third of the industry’s net adds are prepaid customers that are converting to postpaid, which means that there is opportunity for Verizon to convert those former Tracfone customers into postpaid customers. “We still have work to do to take advantage of that,” he said, noting that the conversion needs to be seamless.
When asked about how Verizon plans to monetize 5G beyond just offering FWA, Sampath admitted that mobile edge compute (MEC) has been slow to take off but said that Verizon is seeing lots of opportunities in private networks. He said that the company is working on “lots of new installations every quarter” and that it believes there is lots of potential upside to those private networks by selling managed services and providing security services.