Big Red’s Strategy With Private Networks Becoming More Clear
November 08, 2022 | A few weeks ago I was lucky to be a part of the Georgetown's Center for Business Inaugural Spectrum Summit. The session which I hosted was all about private networks. Private networks, like “Edge”, have been talked about much but there has been very little tangible movement…but that may be a-changin’!
On my panel were representatives from some of the key players in this private network space. All of these individuals spoke as to how in the past year – more than two years since the CBRS spectrum auction – the number of incomings and requests for proposals around private networks has significantly built each month. The momentum is real.
This is backed by some great reporting by LightReading noting some recent CBRS initiatives including the NFL for coach-to-coach communications and American Tower’s entry into the robotic world for shopping malls using this 3.5GHz spectrum. iGR has over 100 examples of private network deployments in its Private Networks Ecosystem Directory, not including trials and proof-of-concepts.
While private networks have caught the interest and focus of industry analysts, financial / Wall Street analysts do not seem to be assigning much upside in their forward looking models for private network contribution despite these robust growth forecasts.
Driving this is what I would call the boy who cried wolf syndrome. Wall Street folks have been burned by the false narratives of revenue growth from the carriers’ 3G, 4G and 5G initiatives. The irony of this is wireless service saw significant deflation during this time and the great ‘build it and it will come’ promise was never realized. During times like this, Wall Street analysts tend to hold tight to the Fool Me Once, Shame on You; Fool Me Twice, Shame on Me proverb. (Can we blame them?)
So it comes as little surprise that on the subject of private networks, there are many naysayers as to how carriers can turn this initiative into a revenue additive one.
Although DISH talks the most about private networks, the one who has the deepest toolkit here is Verizon. And, while I know the negativity is quite high on this name, I think there is a front-footed private network strategy coming from Basking Ridge.
In an October 2022 interview, Arvin Singh, Verizon Business’ Head of 5G and edge innovation, offered some important ‘breadcrumbs’ to its plans. He noted the following:
“All of it is fully managed end-to-end….When we [Verizon] do the design, deployment and managed services end-to-end, we technically play a role of integrator. Those that have limited RF expertise and embark on the journey without a steady hand like a major telco, those are where we’ve seen the struggles.”
The “role of an integrator” could be an important clue as to what is on the internal Verizon’s private network whiteboard.
Stating the obvious, Verizon has the most at stake. One of the concerns from Verizon investors (and perhaps one of the main reasons for its 28 percent stock decline this year) is confusion as to how it will capture the return on $52B+ investment it spent on C-Band spectrum. And remember, Verizon was also the highest bidder in the CBRS PAL spectrum auction, bidding $1.9B (DISH was bidder #2, bidding $912MM).
On its Q3’22 earnings call on October 21st, Verizon CEO Hans Vestberg commented on its private network plans saying: “We had three different sort of use cases on the edge computing. One was private networks, another was public mobile edge compute, and the third was the private 5G mobile edge compute. We see clearly a very strong demand on the private 5G networks, which is the prelude to go into all others”.
If Verizon can connect these dots it will pay dividends (literally and figuratively!). Verizon’s Private 5G network success will rest on the backs of its C-Band spectrum and its CBRS spectrum investments. Where Verizon has deployed C-Band, it is seeing positive and measurable network results. According to a recent Opensignal report, since Verizon lighting up 5G mid-band in January, users are spending much more time on this band. Specifically, in March, 2022, C-band only showed up in 16 percent of readings in March but almost 50 percent in September, overtaking the 850 MHz band for the very first time ever.
While this is all positive, there is little evidence to show that customers are willing to pay more for this faster service. But will enterprises? It’s a bit more “complex.”
Data shows that one of the biggest challenges in CBRS and private network deployments for the customers themselves is the complexity involved. There needs to be a “KISS” (Keep it simple stupid) approach to private network deployment if it is able to live up to these wildly optimistic growth outlooks.
If Verizon could possibly master a role as an “integrator” for these services and help enterprises work through this complexity, there is indeed real value in that. Imagine starting a home project without a General Contractor. It would be timely and full of a lot of headaches. Can Verizon play the “GC” role for private network deployment? Possibly. They have the spectrum for it - but do they have the internal structure in place to help educate and hold enterprises’ hands in this deployment? I would not bet against them on this. A plan is very much in place – the private network demand and market just need to come to it. Now I finally think it is.
The next chapter (test?) to watch for Verizon is if it can use their impressive spectrum portfolio and deep relationships with the enterprise sector to work in their favor (and to that of their income statement). If they are able to do this – and see a revenue lift because of it – those Wall Street Analysts (many of which are friends) will start sharpening their pencils! This I promise to be true.