C-Band Spectrum Could Save U.S. Wireless Carriers’ 5G Plans
In February of this year, the Federal Communications Commission announced the winners of the C-Band spectrum auction: AT&T and Verizon Wireless, who together spent almost $70B on the frequencies plus billions more each on related costs. The two leading wireless carriers are betting that their huge investments will pay off by jumpstarting their 5G offerings, which have been lackluster at best so far. T-Mobile, the current leader in 5G, was a distant third in the bidding, at just over $9B, but T-Mobile’s strategy was to stay in the contest long enough to drive the price up for its two larger competitors and then get out – and the strategy worked!
The 280 MHz of C-Band spectrum awarded this winter will be made available on a staggered basis. The U.S. is a bit late to the party, as leading 5G countries in Europe and Asia, as well as Australia, made C-Band available for 5G a few years ago. “C-Band” (sometimes known as “Midband”) refers generally to the frequencies between 4 GHz and 8 GHz, but more specifically means the narrower slice between 3.7 GHz and 4.2 GHz, currently used by satellites.
C-Band is the “beachfront property” of spectrum suitable for 5G because it is of high enough frequency to provide for relatively large dedicated 50 MHz “slices” that carriers need to provide true 5G performance but is also of low enough frequency that it has decent propagation, that is, range and ability to penetrate obstacles, such as buildings. The higher the frequency, the greater the capacity (i.e., bandwidth), but the poorer the propagation, and the greater cell site density carriers will need, thus increasing deployment costs. Some analysts have described C-Band as the ideal compromise between radiofrequency (RF) coverage and RF bandwidth.
Until now, AT&T and Verizon Wireless have lacked the spectrum necessary to provide 5G at a level that out-performs their advanced 4G services on a large scale. True 5G (per the International Telecommunication Union’s (ITU) definition) requires at least 100 MHz of spectrum, which is generally available only in Midband and millimeter wave frequencies, but the latter have propagation deficiencies, compared with lower frequencies, and thus require greater cell site density.
Most of the C-Band frequencies that AT&T and Verizon Wireless recently won will be available in 46 “Partial Economic Areas” or “PEAs” (i.e., metro markets) by the end of this year, and will enable them to bring true 5G service to about 60% of the U.S. population (roughly 100M people). The spectrum needed to serve the rest of the country, including several large PEAs, will not be released until the end of 2023. These larger markets include the Washington, D.C., Denver, and Atlanta metro areas. By 2024, Verizon Wireless will have enough C-Band spectrum to provide its 5G Ultrawideband Service to 250M people in the U.S.
This is exactly the shot in the arm that major 5G providers – especially Verizon Wireless and AT&T – needed, and it will benefit commercial and consumer customers in several ways. The 5G use cases for fixed wireless applications, edge computing, and Internet of Things (“IoT”) is going to explode. Verizon Wireless, for example, plans to offer fixed 5G business internet service as well as 5G home internet in its C-Band markets. It has also announced plans to leverage its new C-Band spectrum to expand its public and private Mobile Edge Computing (MEC) offerings, for which it partners with AWS (public MEC) and Microsoft (private MEC). We have long said that the real promise of 5G for enterprise customers is not faster mobile data service, but more ubiquitous, cheaper edge computing, private 5G networks, and IoT applications that will drive innovation. And in each of these areas, niche players, rather than the major wireless carriers, are out in front.
In terms of mobile applications, the word on the street is that Verizon will only offer 5G Ultrawideband Service (the faster of its two 5G offerings) to premium customers or in connection with premium plans. The rest of us will have to settle for the slower, Nationwide 5G service. Verizon’s current Ultrawideband Service is provided over millimeter wave spectrum, which requires line-of-sight and thus is available only in portions of about 60 cities. The base upcharge to add 5G to existing 4G plans is currently $10/month, but analysts admit to not being able to predict yet how the deployment of new C-Band spectrum will affect rate plans. If we had to guess, we would bet they will be significantly higher than 4G rate plans, just to recoup the huge costs of building 5G networks. It is unlikely that Verizon Wireless or AT&T will offer unthrottled, unlimited data plans on true 5G, as the potential for abuse with 5G is so great. We see T-Mobile as the only major carrier who will be willing to risk offering unlimited 5G plans. They have always been way out in front of the pack in terms of bleeding edge pricing.
In fact, in consumer mobile services, T-Mobile is consistently rated the best overall domestic wireless carrier, and it has a 12-18 month lead over AT&T and Verizon Wireless in 5G. Just last month (July 2021), three separate ratings organizations ranked T-Mobile’s 5G network as having the greatest coverage and being fastest and most reliable. Still, Verizon Wireless’ and AT&T’s C-Band acquisitions could position them to surge past T-Mobile in mobile 5G by 2024, given that their C-Band holdings arguably deliver superior propagation to T-Mobile’s millimeter wave spectrum and superior bandwidth to T-Mobile’s 2.5 GHz spectrum. T-Mobile has admitted it will realize its best overall performance by using a “layer cake” approach to spectrum management, involving a combination of 2.5 GHz, Midband, and millimeter wave. The superior propagation of C-Band frequencies should reduce anticipated deployment costs and deployment time (no need to build as many new sites) for the two behemoths. But a 12-18 month lead for T-Mobile in consumer services will be difficult to overcome.
The enterprise market is a different story, where T-Mobile is a distant third with only a 9% share. Industry observers predict that its 5G service will flop if it can’t get its share of the enterprise market up. (It’s likely that enterprises will be more willing than consumers to fork over higher rates for true 5G.) While its Magenta unlimited 5G plans, with no throttling and no data cap, may keep it in first place with consumers, we are not seeing enterprise customers turning to T-Mobile as a first- or second-choice option for the employees’ mobile wireless services.
Lumbering AT&T continues to lag behind T-Mobile and Verizon Wireless in 5G deployment. Most of AT&T’s marquee 5G deployments have been limited to venues, such as sports arenas. AT&T’s crushing debt load is one factor that analysts predict will hamper its ability to build out its nationwide 5G network swiftly, even with its new C-Band frequencies, which cost it almost $30B (including auction-related costs). That buildout will not be cheap.
Even though C-Band has superior propagation relative to higher frequency bands, carriers will still need cell sites about every half mile, with more density in crowded urban areas. That approach is still a huge improvement over announced plans to build small cell sites on telephone poles or light posts spaced 1000 feet apart in heavily populated areas – a daunting and expensive task. Realizing the full potential of 5G will require a great deal of engineering, maintenance, testing, and coordination – far more than is required for 4G.
We are still at least a year out from when enterprise customers should start shopping for 5G devices and negotiating 5G data plans for their employees. As of this writing, there are at least four phones on the market that are C-Band compatible: iPhone 12, Google Pixel 5, LG Wing, and Samsung Galaxy S21 series, but industry observers predict that there will be at least twenty C-Band-compatible phones on the market by the end of this year. If you are in the market for a new 5G phone, look for a device that can support “frequency band n77.”
LB3 and TC2 will continue to monitor the roll-out of 5G and keep you posted on major developments. In the meantime, if you have any questions please feel free to contact Kevin DiLallo, or any of the LB3 or TC2 individuals with whom you work.