Spectrum is the foundation of every wireless business opportunity, and Verizon has less spectrum--and less spectrum per customer --han any other major nationwide mobile operator in the U.S. market.
Verizon seems to have switched spectrum or capacity strategy following the 2015 AWS-3 spectrum auction, said to be much more costly than Verizon anticipated, at $2.92/MHz/POP. Verizon acquired a huge trove of millimeter spectrum, then launched a fiber deep network upgrade that allows small cells to use that spectrum.
Verizon then declined to bid in recent low-band or mid-band spectrum auctions.
Historically, mobile operators have always faced tradeoffs for increasing capacity. They could acquire new spectrum or shrink cell sizes. Traditionally, cell division has been the way most new usable capacity has been gained, and Verizon--since 2015--has emphasized small cell sizes rather than new spectrum acquisition as the primary means of increasing capacity.
That has been true even as Verizon has migrated spectrum away from 3G to 4G. But some observers believe Verizon will have to return to gaining new spectrum at some point within the next year or so, as its millimeter wave assets--very helpful for dense, urban areas--might be inadequate for capacity supply across wider areas (coverage).
Dynamic spectrum sharing also will help, as DSS allows 5G handsets and 5G radios to use 4G spectrum. The issue is of course that DSS works best when there is lots of unused 4G spectrum, something generally not true at Verizon.
Not surprisingly, some observers continue to believe Verizon will eventually have to augment its spectrum holdings. That might take the form of bidding to acquire priority access licenses in the upcoming Citizens Broadband Radio Service auctions, C-band spectrum or perhaps 40 MHz of Ligado spectrum at 1.5 GHz at some point.
Should the T-Mobile US merger with Sprint fail, Dish Network spectrum might be an option, perhaps as a lease. Dish Network holds licenses for significant amounts of low-band and mid-band spectrum.
In principle, Verizon could also lease spectrum from Sprint, should the merger fail. We will have to see whether Verizon’s big bet on dense fiber networks supporting small cells and millimeter wave spectrum will work, without major new spectrum acquisitions.
On historic grounds, Verizon’s strategy makes sense. Most of the capacity growth U.S. mobile operators have gained has been from using smaller cells. New spectrum has played a key, but less important, role. Better radios are a third way mobile operators have been able to increase capacity.
Verizon has lots of new millimeter wave spectrum to work with. The issue is whether millimeter wave assets alone will do the job.
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