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Verizon And FCC Push ‘MmWave’ For 5G Wireless, In Dot-Com Twist

Federal regulators and Verizon Communications ( VZ ) have zeroed in on airwaves that could make the U.S. the global leader in rolling out 5G wireless services. One market opportunity for 5G may be as a challenger to the cable TV industry’s broadband dominance. Think Verizon Wireless, not Verizon’s FiOS-branded landline service, vs. the likes of Comcast ( CMCSA ) or Charter Communications ( CHTR ). First, though, airwaves need to be freed up for 5G. That’s where high-frequency radio spectrum, also called millimeter wave, comes in. In particular, U.S. regulators are focused on the 28 gigahertz frequency band, analysts say. Most wireless phone services today use radio frequency below 3 GHz. If 28 GHz or millimeter wave rings a bell, that’s because several fixed wireless startups (WinStar, Teligent, Nextlink, Terabeam) tried and failed in commercializing products relying on high-frequency airwaves during the dot-com boom of the late 1990s. Business models were suspect, and their LMDS (local multipoint distribution services) were susceptible to interference from rain and other environmental conditions. Waves Of The Future? When the tech bubble burst in 2000-01, the LMDS startups perished. Technology advances, however, could make the high-frequency airwaves prime candidates for 5G. “In the 1990s, with LMDS, mobile data wasn’t mature, and neither was the Internet, and neither was the electronics industry — it couldn’t make low cost, mmWave devices,” said Ted Rappaport, founding director of NYU Wireless, New York University’s research center on millimeter-wave technologies. “Wi-Fi was really brand new then, and broadband backhaul was not even built out. LMDS was originally conceived to be like fiber, to serve as backhaul (long-distance), or point-to-multipoint, and was not for mobile services. Fast forward to today, backhaul is in place to accommodate demand, and electronics at mmWave frequencies are being mass-produced in cars. Demand for data is increasing more than 50% a year, and the only way to continue to supply capacity to users is to move up to (millimeter wave).” The Federal Communications Commission in October opened a study looking at 28, 37, 39, and 60 GHz as the primary bands for 5G. While the FCC says 28 GHz airwaves show promise, some countries have been focused on higher frequencies rather than 28 GHz. FCC Chairman Tom Wheeler, speaking at a U.S. Senate committee hearing on March 2, said: “While international coordination is preferable, I believe we should move forward with exploration of the 28 GHz band.” Wheeler said that the U.S. will lead the world in 5G and allocate spectrum “faster than any nation on the planet.” Verizon Makes Deals Verizon, meanwhile, on Feb. 22 agreed to buy privately held XO Communications’ fiber-optic network business for about $1.8 billion. In a side deal, Verizon will also lease XO’s wireless spectrum in the 28 GHz to 31 GHz bands, with an option to buy for $200 million by the end of 2018. XO’s spectrum covers some of the largest U.S. metro areas, including New York, Boston, Chicago, Minneapolis, Atlanta, Miami, Dallas, Denver, Phoenix, San Francisco and Los Angeles, as well as Tampa, Fla. and Austin, Texas. Verizon CFO Fran Shammo commented on the XO deal at a Morgan Stanley conference on March 1. “Right now we have licenses issued to us from the FCC for trial purposes at 28 GHz. The XO deal gave us additional 28 GHz,” Shammo said. “The rental agreement enables us to include that (XO spectrum) in some of our R&D development with 28 GHz. So that just continues the path that we’re on in launching 5G as soon as the FCC clears spectrum.” He noted that Japan and South Korea plan to test 5G services using 28 GHz and 39 GHz airwaves. Some analysts doubt 28 GHz airwaves will be on a fast track. “We are skeptical, not only on the timing of the availability of 28 GHz, but also its ultimate viability in a mobile wireless network,” Walter Piecyk, analyst at BTIG Research, said in a report. Boosting signal strength at higher frequencies is a challenge for wireless firms. Low-frequency airwaves travel over long distances and also through walls, improving in-building services. One approach to increase propagation in millimeter wave bands, analysts say, is using more “small-cell” radio antennas, which increase network capacity. Wireless firms generally use large cell towers to connect mobile phone calls and whisk video and email to mobile phone users. They also install radio antennas on building rooftops, church steeples, or billboards. Suitcase-sized antennas used in small-cell technology are often mounted on lamp posts or utility poles. Verizon has been testing small-cell technology in Boston. When Will 5G Happen? Verizon says it will begin rolling out 5G commercially in 2017, though its plans are still vague. While many wireless service providers touted 5G plans and tests at the Mobile World Congress in February, makers of telecom network equipment are being cautious. “General consensus (at MWC) seemed to indicate that the 2020-time-frame will mark full-scale 5G deployments,” Barclays analyst Mark Moskowitz said in a report. Verizon has said it doesn’t expect 5G networks to replace existing 4G ones. While 5G is expected to provide much faster data speeds, wireless firms also expect applications that require always-on, low-data-rate connections. The apps involve data-gathering from industrial sensors, home appliances and other devices often referred to as part of the Internet of Things. Both Verizon and AT&T ( T ) have recently touted 5G speeds up to 1-gigabit-per-second. That’s roughly 50 times faster than the average speeds of 4G wireless networks in good conditions. AT&T Chief Executive Randall Stephenson recently said 5G speeds could match fiber-optic broadband connections to homes. At the Morgan Stanley conference, Verizon’s Shammo also said 5G could be a “substitute product for broadband.” Regulators would like to create new competition for cable TV companies. But, Verizon says, it’s still early days. “With trials, we’ll figure out exactly what we can deliver, what the base cases are,” said Shammo. “5G has the capability to be a substitute for broadband into the home with a fixed wireless solution. The question is can you deploy that technology and actually make money at a price that the consumer would pay?” Sanyogita Shamsunder, Verizon’s director of network infrastructure planning, says high frequencies can support 5G. “Radio frequency components today are able to support much wider bandwidth (think wide lanes on the highway) when compared to even 10 years ago. What it means is we are able to pump more bits at the same time,” said Shamsunder, in an email. “Due to improvements in antenna and RF technology,” she added, “we are able to support 100s of small tiny antennas on a small die the size of a quarter.”

Spectrum Wild Cards May Add Supply, Impact Verizon, T-Mobile, AT&T

Federal regulators appear set to go forward this spring with the auction of airwaves now owned by local TV broadcasters, but other spectrum-related developments loom as wild cards that could increase supply, thereby impacting wireless industry competition and M&As. Those other developments include the contract award for FirstNet, the federal government’s plan to create a nationwide wireless broadband network dedicated to public safety; the re-emergence of LightSquared, renamed Ligado Networks, from Chapter 11; and whether wireless firms succeed in lobbying to use commercial LTE technology in unlicensed spectrum now allocated to Wi-Fi. The Federal Communications Commission still plans to begin the “Broadcast Incentive Auction” on March 29. The auction, which could last five to six months, will free up an estimated 60 megahertz to 80 MHz of prime, low-frequency radio spectrum for wireless services. Results of the spectrum auction could affect the competitive future of IBD Leaderboard company AT&T ( T ), which has seen accelerating growth in recent quarters, and rival Verizon Communications ( VZ ) — a member of IBD’s Big Cap 20 — as well as highly rated Comcast ( CMCSA ). AT&T and Verizon are expected to buy TV airwaves in the auction, and cable leader Comcast also will likely bid, say analysts.  Alphabet ’s ( GOOGL ) Google has ruled itself out. AT&T and Verizon own more than 70% of low-frequency airwaves in the top 100 U.S. markets. Low-frequency airwaves travel over long distances and can pass through walls, improving in-building services. The FCC will impose a “quiet period” that bans negotiation over spectrum until the auction is over. Satellite TV broadcaster Dish Network ( DISH ) has acquired some 75 MHz of midband spectrum — which covers a little less territory than low-frequency spectrum — but it lacks a wireless network partner and is in limbo until the auction ends, analysts say. Dish has filed to bid in the auction, but observers are uncertain that it will. The auction’s outcome could well raise or lower the odds of some major deals, long rumored in the industry: — that Comcast will acquire a wireless services provider; — that a cable TV leader will strike an alliance with Verizon; — that Verizon will enter into a spectrum-leasing deal with Dish; — that Dish and T-Mobile will merge. But even beyond the auction, by early 2017, further developments involving the FirstNet contract, Ligado, unlicensed-LTE and satellite wireless firm Globalstar ( GSAT ) could impact Dish’s plans, as well as the spectrum strategies of AT&T, Verizon and T-Mobile. That’s because all these elements provide alternatives for network capacity, aside from the auction. Here’s a run-down of several scenarios: — FirstNet. Whoever wins this first-responder contract would need to invest in network infrastructure. Congress has set aside 20 MHz of spectrum — a wide swath of the airwaves — in the “D block” of the 700 MHz frequency band for the public safety network. The winning bidder is expected to enter into a lease agreement with the FirstNet authority for access to the 20 MHz of prime airwaves. While the FirstNet public safety network would be prioritized for emergency responders, the winning bidder would also be able to use the spectrum for commercial purposes and consumer services. The government will award the FirstNet contract after the TV airwave auction ends, if the government’s timetable proceeds as planned. Verizon has been viewed as the front-runner, but AT&T has made clear that it’s interested. T-Mobile ( TMUS ) could bid but faces long odds vs. AT&T and Verizon, analysts say. — LTE-U. Verizon and T-Mobile have been biggest proponents of developing a technical standard that would allow 4G LTE commercial technology to use unlicensed spectrum. Google, Microsoft ( MSFT ) and the Wi-Fi Alliance, which certifies Wi-Fi network gear, have lobbied the FCC to protect unlicensed airwaves, saying that interference could impair Wi-Fi services. Apple ( AAPL ), a Wi-Fi Alliance member, has not said anything publicly. Verizon and AT&T claim that no special LTE-U equipment certification is needed as long as devices meet certain basic FCC rules for unlicensed spectrum. Chipmaker Qualcomm ( QCOM ) has been backing LTE-U deployment. The FCC in February allowed Qualcomm to move ahead with LTE-U testing at two Verizon facilities to demonstrate that the technology would not interfere with Wi-Fi. Qualcomm and the Wi-Fi Alliance have been working on “coexistence” plans. The cable TV industry has a big stake in the outcome, analysts say, because Comcast, Charter Communications ( CHTR ) and others have been expanding public Wi-Fi networks. While Verizon has targeted 3.5 GHz spectrum in the near term, it could try to carry out LTE-U in higher 5 GHz airwaves that cable TV firms covet. If LTE-U gets a green light, the Apple iPhone and other devices could support the technology by 2018. — LightSquared , now Ligado. Former Verizon Chairman and CEO Ivan Seidenberg is chairman of Ligado, while former FCC Chairman Reed Hundt is a board member. Ligado, controlled by private equity firms, has a sizable 35 MHz of midband spectrum. After emerging from bankruptcy, Ligado reached agreements with tractor maker Deere ( DE ) and GPS device maker Garmin ( GRMN ), resolving issues over potential global positioning system interference. While Ligado might provide services to industries such as energy or transport, or pursue next-generation 5G services, it could sell the airwaves as well. The company hasn’t spelled out its new business model, analysts say, and it’s still awaiting some FCC approvals to use the spectrum for commercial purposes. — Globalstar.  The FCC has been studying Globalstar’s petition to use airwaves in the midfrequency 2.4 GHz block for wireless services. The Wi-Fi Alliance and other groups have opposed Globalstar’s plans, citing possible interference issues. Globalstar could lease capacity to a wireless firm or an Internet company if it wins at the FCC. Globalstar’s stock, though, has plunged about 50% in the past year to near 1.40 while its FCC approval has languished. Image provided by Shutterstock .

Comcast Ramps X1 Set-Top Boxes As FCC Plans Market Makeover

Comcast[ ticker symb=CMCSA] is pulling out all the stops marketing its Xfinity video service and its new set-top boxes, at a time when the FCC plans to stoke set-top competition. The nation’s No. 1 cable TV firm advertised its Xfinity video-on-demand service during Super Bowl 50, where the big game’s ad rates were quoted at $2.5 million-plus for 30-second slots. Moreover, Comcast this year launched a social media campaign targeting millennials. Comcast paid Twitter ( TWTR ) to co-develop short Web videos from 19 social media personalities based on their Xfinity product experiences. The social media personalities posted videos on platforms such as Instagram and Vine while Twitter promoted them in tweets. Meanwhile, Comcast says its field technicians are installing 40,000 advanced X1 set-top boxes per day in homes. Some 30% of Comcast’s video customers — more than 7 million — were using X1 set-top boxes as of Jan. 1. By year-end, Comcast expects at least half of its 22 million video subscribers will be using Internet-ready, X1 set-top boxes in their homes. Comast is getting pay-back for its Xfinity marketing push. Comcast added 89,000 video customers in Q4, its biggest quarterly net gain in TV subscribers in eight years. Some analysts forecast Comcast could see a net add in TV subscribers in 2016, despite a trend toward Internet video among young adults, some of whom have never subscribed to pay-TV. “We’ve got to play offense with things like X1,” Comcast CEO Brian Roberts said on the company earnings conference call this month. Comcast’s capital spending is expected to rise 8% in 2016 to $9.2 billion, driven by its X1 deployment and spending at NBCU Universal theme parks. Comcast Offering Short Web Video Clips The X1 entertainment platform provides access to live broadcast, on-demand video and DVR-stored content. In November, Comcast partnered with 30 broadcast and cable networks to bring short-form Web clips to X1 set-tops, as part of its video-on-demand (VOD) lineup. Internet search, Web browsing and a Netflix ( NFLX ) app are not, for now, part of X1. DVR-stored content is in the Internet cloud, not the set-top, providing more space. Customers can watch DVR content on mobile devices as well as TV sets. Analysts say Comcast has put a lot of work into developing a cloud-based TV channel guide and user interface, a voice-controlled remote, programming recommendations, on-screen sports app and social media features for sharing video. “X1 represents the industry’s best-in-class technology due to the volume of content available, the flexible cloud infrastructure and the simplicity of its user interface,” Nomura analyst Anthony DiClemente said in a recent research report. Comcast has a huge VOD library of movies and TV shows. It aims to take advantage of marketing opportunities, such as the Oscars. Comcast in February provided some 20 past Academy Award winners on X1 VOD  as well as content gleaned from past Oscar telecasts. With X1, one goal is to drive up subscribers’ average monthly spending, with VOD and other purchases. Aside from video subscriber gains, the company eyes ad gains. Comcast aims to use viewing data gleaned from set-top boxes for targeted advertising — inserting commercials for specific audiences into VOD and other programming. To protect privacy, set-top viewing data is aggregated and anonymous. Comcast has acquired two companies, FreeWheel and Visible World, to build up its targeted-advertising platform. The cable TV firm also has been working with content companies.  Amid falling TV audience ratings, they’re eager to obtain TV data on par with digital platforms. Advertisers have upped their spending on the Internet, where they can target individuals based on what websites they visit and what searches they conduct. FCC Wants More Set-Top Competition Amid Comcast’s big Xfinity push, federal regulators now aim to increase competition in the set-top box market. The Federal Communications Commission plans to make it easier for consumers to switch from set-top boxes leased monthly from pay-TV companies to new devices sold at retail by consumer electronics or Internet companies. Besides Comcast, the initiative could impact Charter Communications ( CHTR ), Time Warner Cable ( TWC ),   AT&T ( T ) and other pay-TV firms that lease set-top boxes for a monthly fee. The new set-top rules could be approved by year-end, though the pay-TV industry is waging a fight against them, with some support in Congress. The cable firms say the new rules aren’t needed in an arena where innovation sparks fast changes. In any case, it could take until 2019 before more of these set-top consumer products appear in the market, because pay-TV companies would have two years to comply with new regulations. By then, Comcast would have a big head start in rolling out X1 technology. Still, new entrants in the set-top box market could match many X1 features, says Joel Espelien, an analyst at the Diffusion Group. “X1 is nice, but I seriously doubt any of its features are defensible in the long run,” he said. Even features such as cloud-based DVR storage may not set X1 apart, he added. “We see declining interest in DVR among millennials,” added Espelien. “They don’t get why they have to ‘record’ things.”