Dan Mead: Our network quality, our ownership, our management,
our employees’ pride of ownership are competitive differentiators
Dan Mead runs the largest LTE operation in the world, by a substantial margin. According to market data by SNS — see page 75 of this issue — US operator Verizon Wireless has 63% of the world’s total users, almost three times as big at the second largest, Japan’s NTT DoCoMo.
His company has played a leading role in getting LTE ready to be the universal standard for mobile communications. “We partnered with some other global carriers to help work on and create the standards — Vodafone, a very important partner of ours, and China Mobile.”
Vodafone is more than an important partner: it is a 45% shareholder in Verizon Wireless, a company created 12 years ago as part of the process that also created the main Verizon group, which owns the other 55%.
Mead was in on the start of Verizon Wireless in 2000, when Vodafone AirTouch — then a European/US operator — exchanges its US mobile interests for that 45% share.
Eight years later, Verizon was one of the first to see the opportunity for LTE in bringing a unified global standard for mobile. It’s now four years since the CTO, Dick Lynch, told Global Telecoms Business about the rationale behind the decision.
And Verizon Wireless had the right spectrum for the technology, says Mead today. “We saw the opportunity with our 700 megahertz contiguous licences to move forward and take a leadership position globally in terms of LTE deployment. We have been working on this for some time and are really excited about the value it is creating for our customers.”
As Lynch explained four years ago, Verizon Wireless was then missing an opportunity because of the technology choices it made at the start of the century. The company used the Qualcomm CDMA family for its 2G and then its 3G services, which meant it was incompatible with the global GSM standards. That had implications: Verizon Wireless customers couldn’t roam internationally, except in a few CDMA countries, without making special arrangements, and Verizon Wireless lost out on roaming revenue from foreign visitors to the US.
A global standard
After looking at Qualcomm 4G options, Verizon Wireless announced its decision four years ago to go for the emerging global standard, LTE — leading a trend that other US operators have followed. That AT&T should have also picked LTE was no surprise: it was already a GSM shop for 2G and 3G. But Sprint, a Qualcomm adherent from the early days, dabbled with WiMax and then also picked LTE for its route to 4G.
But Verizon Wireless is clearly in the lead. Lynch came to Mobile World Congress in Barcelona in February 2010 — another break with tradition, as the GSM Association had previously restricted itself to GSM-family operators — to announce plans to launch LTE in a couple of dozen US cities by the end of that year.
A year on from that launch, we are still in the early days of LTE. Verizon Wireless has an estimated 4 million customers, but that’s out of about 6.4 million worldwide at the end of 2011, according to SNS’s figures.
The LTE rollout is creating huge potential for the company. “The way that we manage our business and set the priorities for our network is that we want to make sure that for every evolution of the network we are creating very good value for our customers,” says Mead.
“So when we think about the LTE network one of the things that excites us is the capability the infrastructure provides for video delivery and for infotainment overall.” These are services “that in the past in many cases you were limited [to receive] in your home. Now with the LTE network that we have we are going to be able to offer a lot more in terms of content, infotainment and video delivery — and this is enabled by the network and the underlying spectrum that we have for the network.”
LTE will not be Verizon Wireless’s single network. The 3G CDMA network will continue side by side with LTE. “It is going to coexist. We are very proud of our CDMA network — it’s a great network for us now, it will be a great network for us in the future, and you’ll see that it will be very complementary. We run multiple networks,” he says.
Both will be connected to fibre backhaul. “We have our global fibre infrastructure and we have a great fibre network here in the US.” That enables Verizon’s FiOS fibre-to-the-home network.
Network quality
“The way we think about [LTE] is that it is complementary to our other networks and we work very hard to differentiate ourselves with the quality of our networks — not letting anyone else come close to us, being the number one network provider. That’s the foundation of our networks.”
One of the biggest challenges for mobile broadband operators over the past couple of years — and a headache looming in the future — is lack of spectrum. Rival operator AT&T tried to address that in 2011 by its now abandoned attempt to buy T-Mobile USA from Deutsche Telekom. Verizon Wireless took another approach: buying spectrum from cable operators that had been thinking about launching mobile services but had had second thoughts.
The 700 megahertz spectrum that Verizon Wireless is using for LTE was previously used for UHF television channels. The Federal Communications Commission auctioned this in 2008 and Verizon Wireless spent about $4.7 billion on seven of the 10 available licences in the FCC’s block C — covering 746-757 and 776-787 megahertz. The licences cover all 50 states of the US except for Alaska — which means the company can offer virtually nationwide services.
This spectrum is way below the frequency normally used for mobile broadband in many parts of the world — usually in the 1,800 or 2,100 megahertz region — and this band has excellent characteristics. It gets round hills, round buildings and through walls. “It gives us very good penetration,” says Mead.
“Spectrum is very important. We wanted to make sure that we were having the capacity for expansion and the increasing demand for LTE.” The company had some additional spectrum, bought in an auction a few years before, but covering only the eastern part of the US. “We’re very cognisant of where spectrum is and how it is owned, and we’re very interested in adding to it.”
So in December 2011 Verizon Wireless agreed to spend $3.6 billion on buying so-called advanced wireless services spectrum — an FCC term — from three cable companies, Comcast, Time Warner Cable and Bright House Networks. “We were very pleased to be able to come to an agreement with the owners for that. AWS is going to be extremely complementary to our 700 C block for our long-term LTE success.”
AWS is closer to the bands used elsewhere for broadband wireless — 1,710-1,755 megahertz for uplink, 2,110-2,155 megahertz for downlink. Verizon Wireless had its own AWS spectrum before the deal, and also has announced deals with other mobile operators, though “all of this is subject to approval”, he notes cautiously.
Extra spectrum
But with its original AWS licences and those it is acquiring, it will have an extra range of contiguous spectrum that will give Verizon Wireless capacity for expansion. But can anyone ever have enough spectrum? At the rate mobile broadband is growing, even doubling spectrum only gives enough for a further year or so.
“I don’t want to speculate too far into the future, but I would say this. Once we have approval and have completed the transaction for AWS we feel we have the spectrum capacity for the expansion based on the demands we see coming from our customers. We’re going to be in a solid spectrum position,” says Mead.
“Every operator, every carrier around the world, watches spectrum, because it’s the foundation of the value proposition you’re offering to customers. We’ll always be watching spectrum. I feel very good about how solid our spectrum position is with this AWS purchase.”
What about the spectrum Verizon Wireless has for 2G and 3G services? Will it be re-engineering this for LTE at some point in the future? “We have a great deal of activity on all of those networks right now. Will we look at that? We are always looking at making sure we use the spectrum we have as efficiently as we can.”
But refarming “is not something that is in front of us in the immediate future because those networks are growing for us. Maybe down the road, but it’s not something that’s of great concern right now.”
At the start of the conversation Mead referred to Verizon Wireless’s collaboration on LTE with Vodafone and China Mobile. What contribution has that made to the development of LTE?
“Our collaboration on global standards helped get LTE off the drawing board and into production,” says Mead. “We were able to offer those standards to key infrastructure providers. I would say one of the most exciting things about LTE is how fast it’s developing and how quickly the providers have coalesced [behind the technology].”
The collaboration goes back years. “We came together around standards that we thought would make difference for the industry and make a difference for our customers. Every company has to decide what to do with those. We decided to use the 700 C block that we had acquired a few years ago and to go to work and to convert it from a standard and a concept and convert it to a powerful operating system. We have created an extremely important value proposition with our LTE network.”
It’s not just for mobile services. In late 2010 Virginia Ruesterholz, service operations president of Verizon’s fixed business, told Global Telecoms Business of a trial to use LTE to deliver fibre-to-the-home-like services in rural areas.
Video distribution
Verizon Wireless and Verizon’s fixed-network operation in the US are independent, says Mead, “but there are some common consumer desires that cross our businesses. We have the absolute best landline fibre-based delivery for broadband and video delivery. We have the absolute best wireless network with LTE. And the common element is the consumer desire for more information wherever they want it and in whatever format they want it, including now the capacity for video distribution wirelessly, [similar to] video distribution over our fibre network into the home.”
Does that mean video distribution into the home will be an important market for LTE, or will it primarily be for people on the move or in the office or the coffee shop? “We see opportunities for a level of integrated experience, so if you’re in the home, in one of our FiOS homes, and you want to walk away from your television set and use your tablet for content delivery, LTE provides those capabilities,” he says.
“There is a lot of work to do in the industry” to allow that, he concedes. “We’re at the very beginning stages of that. We think it’s something important to customers, to let them use that flexibility, to use their wireless device inside the home and outside the home for communications.”
Are the terminal makers living up to Verizon Wireless’s expectations for delivering LTE-compatible equipment? “I have been extremely encouraged by their level of engagement,” he says. When the company announced the commercial launch of its LTE network at the US Consumer Electronics Show in the early weeks of 2011, “we said we would have nine or 10 devices out by June, and we hit that, and we have continued to add to that”, he says. “We have great breadth of top manufacturers, great breadth in terms of smartphones, tablets, mifis and USBs.”
The device manufacturing ecosystem “really saw the possibilities and they didn’t hesitate”, he adds. “They wanted to be part of it. I am very complementary of them and really appreciate how they have responded to our market launches — and having devices ready for the launch.”
Verizon Wireless has a huge lead, but in time the US is going to be a highly competitive market for LTE, with AT&T in the business and Sprint joining soon. What is going to distinguish Verizon Wireless’s LTE from the others operators’ offerings?
“Ours is the best and always will be the best,” promises Mead. “I’m just the guy running the place. The cornerstone of our value creation is the quality of our network and the network experience. And we never take our customers for granted in terms of our network experience. We never let a day go by when we don’t challenge ourselves, when we’re going to find ways to do things even better. It’s at the very core of our company, the core of our culture and the drive of our employees. We’re going to make sure that we run our networks in a way that is better and stronger than anyone else.”
High standards
How does he ensure the company achieves that target? “We set very high standards for ourselves,” says Mead. “We have to work to beat ourselves. If we are in a leadership position we have to challenge our own work to remain in that leadership position. We push ourselves in every aspect of the business.”
Verizon Wireless sets “very rigorous standards” for devices and equipment providers. “We do a tremendous amount of testing,” he says. “We test new devices in our network. We challenge ourselves.” It requires “ a great deal of rigour”, he says. “It is very hard, very demanding, to have a new device placed on our network.”
In the LTE area operators in some countries are talking about network sharing. In a few cases — Russia, example — there is an idea for all LTE operators to use a single network. Is that a proposition that Mead would entertain?
“Our network quality, our ownership, our management, our employees’ pride of ownership are competitive differentiators of ours,” says Mead. “The industry is best served if everyone runs their own network and that’s what we intend to do.”
Finally, what’s the biggest thing that the FCC could do to improve the position of the operators and their customers in the US? “I am very encouraged about the stance of the FCC over the past year and their alignment with the priorities we have in the industry in terms of spectrum availability,” he says.
“The FCC has taken a leadership position with the administration.” The regulator is pressing the case for making more spectrum available. “In my conversations with the chairman and the members they are very forward thinking. The most important thing they could do is make the spectrum available. The level of competition will be extremely robust.” GTB
Further reading from Global Telecoms Business:
Verizon Wireless spends $3.6bn on spectrum 05 Dec 2011
Sprint takes AT&T/T-Mobile deal to the courts 03 Nov 2011
Sprint 'to introduce LTE' in 2012 29 Sep 2011
Verizon Wireless to unveil LTE phone 16 Mar 2011
Verizon to sell Motorola LTE phone 22 Dec 2010