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U.S. telecom giants take different paths to 5G

“I need a number!” Verizon Communications Inc.’s chief executive called to his senior network lieutenant shortly before the carrier reported fourth-quarter earnings. Hans Vestberg wanted to be able to broadcast to Wall Street analysts how many cities the carrier would light up with faster 5G service in 2020—the more, the better.

It is early days for 5G networks, but each large U.S. wireless carrier is looking to differentiate its service, touting the number of markets it has reached with the faster networks and the benefits of the type of airwaves it is using. The new technology promises to be up to 100 times faster than 4G with much lower latency, the time it takes for machines to respond to each other, but it also will require the companies to install thousands of antennas and redeploy airwaves.

Unlike 4G, which offers wireless service that is largely the same from carrier to carrier, three flavors of 5G coverage are emerging, shaped by the spectrum each U.S. carrier is using to power it. That is leading to increasingly nasty marketing spats over what 5G actually is. And consumers will need new 5G-compatible cellphones no matter which company they buy service from.

Verizon’s 5G is based on high-frequency millimeter-wave spectrum that delivers ultrafast speeds but can’t travel far or easily penetrate hard materials. The largest U.S. carrier by subscribers has focused on building out service in hubs like stadiums and pitching businesses on its ability to deliver localized private networks.

Sprint Corp. ’s early 5G service in nine cities, meanwhile, relied on mid-band spectrum, which is considered the sweet spot for the next-generation service because it offers broad coverage and the signals penetrate walls easily. Most of Sprint’s customers will transition to T-Mobile US Inc., along with Sprint’s spectrum holdings, now that the carriers’ merger has closed.

T-Mobile relied primarily on low-band spectrum for its early 5G coverage, which it launched nationwide late last year. That low-band spectrum travels long distances but can offer speeds comparable to 4G. The company has used millimeter-wave spectrum for 5G service in some parts of a few cities.

Karri Kuoppamaki, T-Mobile vice president of network technology and strategy, said late last year before T-Mobile’s 5G launch that it was “just a starting point” that the carrier would build on, particularly as it gains more spectrum from Sprint. T-Mobile, known for its colorful remarks about rivals, has poked fun at larger carriers’ spottier coverage to date, particularly Verizon’s.

Three Roads to 5G

As U.S. carriers roll out the latest generation of cellular networking, the speed and range you’ll get depends in part on your location—and the frequency of the signal.

AT&T Inc., meanwhile, uses millimeter-wave spectrum for the 5G service it builds for businesses and hubs like sports arenas, and low-band spectrum for consumers. The company has said it would offer nationwide 5G coverage by the end of the second quarter.

“The truth is that you need all of the above,” from low- to high-band spectrum, to maximize the way 5G service is used, says Durga Malladi, senior vice president of 5G at Qualcomm Inc., which designs semiconductors used in mobile phones. This year and next, U.S. carriers will broaden their coverage using other spectrum bands as they repurpose airwaves currently used for 3G and implement technology that shares spectrum in the same band between 4G and 5G users, he adds.

Countries like Germany and South Korea have made mid-band spectrum the centerpiece of their 5G rollouts, but those airwaves in the U.S. have been tied up by government squabbles and competing uses.

The Federal Communications Commission has said it would auction C-band frequencies, which are used by satellite companies to carry TV signals, later this year. That mid-band spectrum has sat in limbo as regulators decided how best to compensate the satellite firms, generate revenue for the U.S. Treasury and make the airwaves available to carriers quickly.

AT&T and Verizon are expected to be interested bidders. Verizon has been peppered with questions from Wall Street analysts about whether it has adequate spectrum to expand its coverage and how it is overcoming some of the challenges posed by millimeter-wave spectrum.

“The initial performance of [millimeter-wave] spectrum has been worse than promised in terms of the coverage it provides,” analysts at research firm LightShed Partners wrote in a January note that said Verizon has less spectrum than AT&T and the new T-Mobile even though it has more customers.

Verizon’s Mr. Vestberg, in an interview, says the company has the spectrum and assets it needs to execute its 5G rollout. The company in February committed to bringing millimeter-wave-based 5G to more than 60 cities by the end of 2020, and in March, amid the coronavirus crisis, vowed to increase its capital spending this year.

It is unclear how severely the pandemic will financially impact the major carriers, all of which have closed some retail locations.

After the Super Bowl, Verizon executives hosted major shareholders including Fidelity Investments in Miami to showcase its 5G service. It displayed equipment from vendors including Ericsson AB and Pivotal Commware. The Pivotal equipment helps pull millimeter-wave 5G signals indoors and around corners.

AT&T has strengthened its spectrum portfolio and network infrastructure in recent years by winning a competition to operate a federally backed communications system for emergency responders called FirstNet.

The $6.5 billion contract gave the carrier a swath of airwaves that it can use to serve first responders as well as its commercial network. The contract has helped cover the cost of network improvements that the carrier says will accelerate its 5G rollout. For example, when AT&T sends a crew to a tower to make FirstNet-related improvements, the company also deploys 5G-ready equipment.

Some investors say that while T-Mobile and Sprint have been occupied with their merger, and while AT&T was busy dealing with a heavy debt load and strategy change after its purchase of Time Warner, Verizon has taken a disciplined approach to capital investments.

“Relative to its carrier peers it’s been way better about not destroying value by buying a bunch of stuff,” says Andrew Choi, a portfolio manager at a Parnassus Investments fund that owns Verizon shares.

Jeff McElfresh, chief executive of AT&T Communications, says next-generation service is part of AT&T’s efforts to deliver high-quality and interactive entertainment. AT&T Communications is the wireless, broadband and satellite business of AT&T.

“At some point in the future, everyone connected will be a 5G customer,” Mr. McElfresh says.

Regardless of the spectrum used, industry analysts say carriers have yet to find the “killer app” for 5G consumers, akin to what Uber Technologies Inc. was for 4G, which means it is unclear how carriers will monetize their network investments like laying fiber and installing thousands of new cellular antennas.

There’s a simple question, Mr. Choi says: Why will someone pay more for 5G than they have historically paid for 4G?

―The Wall Street Journal

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