Verizon Increases FWA Investment to Accelerate Fiber Optic Network Expansion

Verizon is increasing its investment in Fixed Wireless Access (FWA). And it hopes to expand and accelerate the construction of its fiber optic network. However, some analysts still believe that the operator’s grand integration plan will not meet expectations.

Verizon Chairman and CEO Hans Vestberg announced on Tuesday that Verizon has raised its FWA user target to 8-9 million by 2028.

As of the end of the third quarter of 2024, Verizon had 4.18 million FWA users (including 2.49 million residential users and 1.69 million enterprise users). That reaches its target of 4 million users about 15 months ahead of schedule. However, in the third quarter, the growth rate of FWA users slowed down. Verizon added 363000 FWA users, compared to an increase of 384000 in the same period last year.

In a research report released after the conference call, New Street Research pointed out that in order to reach the upper limit of its 2028 user target, Verizon needs to increase FWA users at a rate of approximately 285000 per quarter. This is lower than the quarterly growth rate of 355000 to 395000 users achieved by Verizon in the past eight quarters, New Street added.

Verizon did not provide detailed information on how many residential and corporate users will be included in the new FWA forecast. New Street estimates that the average total number of consumers per quarter may be around 170000, and this slower pace “should give cable TV investors a sigh of relief”.

Verizon is confident in its ability to support its updated FWA user targets. Also,it plans to expand FWA coverage to an additional 30 million households and businesses over the next four years, totaling 90 million.

Mobility first strategy

Joe Russo, Executive Vice President and President of Verizon’s Global Network and Technology Division, stated that the expansion will adopt a “mobile first” approach and will be partially achieved through active deployment of C-band and millimeter wave spectrum, including deployment on Verizon’s Small Cell network.

Russo said that the capacity plan does not include strict allocation of “success based capex” to FWA, but Verizon is open to exploring this in the future.

“We believe that what they are basically saying now is the same as others – they are adding capacity for the mobile business, which will generate excess capacity that can be sold to FWA customers; they cannot simply add capacity for FWA alone, “New Street added in its post event research report.”

In addition, drawing on Starry’s approach, Verizon will drive the expansion of FWA through a new 1-gigabit multi residential unit (MDU) platform, which is currently being piloted and planned for widespread commercial promotion by 2025.

Greater fiber ambition

Verizon also plans to expand its fiber optic business and accelerate network construction by acquiring Frontier Communications.

Once Frontier joins, Verizon expects to have over 30 million fiber passings by 2028. According to Vestberg, for Verizon, there is a clear path over time to expand fiber coverage to 35 to 40 million households and businesses.

Verizon adds approximately 500000 Fios coverage each year. With the completion of the Frontier transaction, this target will increase to 650000 by 2025 and reach a pace of at least 1 million per year thereafter.

“What I want to make clear is that my goal is to bring Fios to 35 to 40 million households nationwide,” Russo said.

In Verizon’s updated fiber plan, only a small portion considers profiting from the Broadband Equity Access and Deployment (BEAD) project.

Some industry observers believe that Verizon has even greater potential in fiber optics. An analysis report released earlier this week by New Street Research suggests that Verizon’s fiber footprint could reach 44 million locations through construction related to the proposed Frontier transaction, accelerated construction within its existing footprint, and pursuit of joint ventures focused on fiber optic. New Street Research also expects Verizon to target additional acquisition opportunities, with Lumen and Brightspeed being potential candidates.

Simultaneously developing FWA and fiber optics for certain regions

Verizon now estimates that in its overall broadband plan with a total of 90 million FWA locations and 35 to 40 million fiber coverage, approximately 25 million households and businesses will be able to use both fiber and FWA services simultaneously.

New Street pointed out that Verizon’s plan includes targeting different niche markets with fiber optic and low-cost FWA products in some regions, which is a “big event”.

What is the reason? The research company added that this indicates that FWA is subject to both demand and supply constraints. “It needs to be clear that we are not saying that demand has been exhausted. After all, they expect to double FWA users in the next four years. In other words, households that choose FWA services and households that choose fiber optic services are largely different groups of people.”

Analysts believe that Verizon is engaged in an unbeatable fusion war

Verizon’s updated FWA and fiber targets aim to drive a larger scale wired/wireless convergence strategy. But some analysts are not convinced.

MoffettNathanson analyst Craig Moffett pointed out in a research report released after Verizon’s demonstration that Verizon’s updated fiber network expansion plan can only cover about 25% of the country, and such coverage is still insufficient to support a reasonable national integration strategy.

He pointed out that for the remaining 75% of regions, Verizon will rely on FWA as it is developing a plan to expand FWA coverage to 90 million people by 2028.

We still find it difficult to see how this can form a feasible integration strategy. In an era where integration is king, Verizon will be at a disadvantage in most parts of the country”, Moffett speculated. “Regardless of the outcome – we believe it’s even worse – Verizon currently engage in a war of integration. We believe it’s a war they can’t win.”

Q3 Performance Overview

Verizon announced service revenue of $27.98 billion for the third quarter of 2024, a year-on-year increase of 1.7%, while Fios revenue was $2.91 billion, an increase of 0.7%. Business revenue decreased by 2.3% to $7.35 billion, while FWA revenue reached $562 million, an increase from $215 million in the same period last year.

The company added 39000 residential Fios Internet users in this quarter, lower than the 69000 increase in the same period last year, and the total number was 7.08 million by the end of the third quarter.
Verizon added a total of 26000 consumer wired broadband users in the third quarter, bringing the total to 7.26 million. The company lost approximately 17000 DSL users in this quarter, narrowing from a decrease of 22000 in the same period last year.

If FWA included, Verizon added 235000 residential broadband users, compared to an increase of 304000 in the same period last year.

Verizon reduced 74000 residential Fios video users, with a total of 2.74 million at the end of the quarter.

Looking ahead, Verizon has set a regular capital expenditure range of $17.5 billion to $18.5 billion by 2025, excluding any expenses related to the acquisition of Frontier.