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Though the first four markets for Verizon Communications Inc.s residential 5G broadband service are quite different in terms of their geography and populations, their selection does offer hints as to how the rollout of next-generation 5G services will occur. Between tearing up streets to lay fiber and installing small cells on municipal infrastructure, city cooperation is essential for 5G deployment - and that is the most prominent similarity between the four cities chosen by Verizon for its initial 5G launches.
Verizon has committed to launching 5G home internet service this year in four cities - Houston, Indianapolis, Los Angeles and Sacramento, Calif. - promising gigabit speeds delivered through a combination of fiber deployment and millimeter wave spectrum. This spectrum can carry massive amounts of data at very high speeds and with minimal latencies, but its shorter wavelengths require the installation of a large number of small cells, or cellular base stations and antennas, on streetlights, utility poles, buildings and other structures.
Sacramento, the first city selected for commercial 5G deployment by Verizon, provides perhaps the best example of how cities cooperate with operators on deployment. The city and the company had a long-established relationship around next-generation technology, as Sacramento was one of the 11 markets where Verizon first said in February 2017 that it would deliver 5G pre-commercial services to select pilot customers. Then in June 2017, Sacramento and Verizon announced a partnership to develop and deploy smart-city services.
This June 2017 deal was a bit unusual in terms of its genesis. Whereas Sacramento and other cities typically issue a request for proposals for services and then pick a bidder from the bunch, Verizon approached Sacramento directly and offered a nonexclusive partnership. Specifically, Verizon agreed to invest $100 million in the citys tech infrastructure. In exchange, Sacramento agreed to streamline its infrastructure approval processes, allowed Verizon to use city conduit for fiber deployment and waived lease revenue from 101 small cell sites over a 10-year period, a value estimated to total $2 million. The city also agreed to charge Verizon a lower rate for attaching 5G equipment to utility poles.
Los Angeles, Houston and Indianapolis, meanwhile, have their own histories with Verizon. In Houston, for instance, the operator already had more than 300 small cells deployed in the city and Verizon previously invested $40 million to strengthen its local data network in Houston ahead of the 2017 Super Bowl.
In launching home internet service, Verizon will be competing against deep-rooted market incumbents. Comcast Corp. is the dominant broadband provider in three of the four 5G markets - Houston, Indianapolis and Sacramento - according to MediaCensus data from Kagan, a media research group within S&P Global Market Intelligence, while Charter Communications Inc. is the dominant broadband provider in Los Angeles. In all four of the markets, AT&T Inc. serves as the No. 2 broadband service provider.
Though each market has a broadband penetration rate above 70%, Verizon is clearly hoping to challenge the cable bundle, as it is offering Alphabet Inc.s YouTube TV and Apple Inc.s Apple TV 4K as part of its broadband package in the four launch cities.
Of the four markets, Houston is the city with the lowest penetration rate, with less than 72% of households subscribing to a residential broadband service. To help close the digital divide, Verizon has committed to delivering 5G service to five traditionally under-resourced neighborhoods identified by Turner as part of his Complete Communities program.
Verizon has yet to announce pricing around its 5G residential broadband service, so it remains unclear if it will be cheaper or more expensive than incumbent services. This will not only influence the decision-making for current cable and telco subscribers, but it will also determine whether 5G can help to close the digital divide for lower-income Americans. In all four markets slated for launch this year, nearly one-fifth of households have annual incomes less than $25,000.
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