On this episode of the Six Five Podcast – The 5G Factor, we are joined by The Futurum Group‘s Ron Westfall for a deep dive into the recent Verizon Frontier deal and the latest innovations in 3D and backhaul technologies.
The discussion covers:
- The strategic implications of Verizon’s $20 billion acquisition of Frontier and its impact on the fiber/5G landscape
- How 3D technologies are being integrated into 5G networks
- Advances in backhaul technology and their importance for 5G deployment
- A holographic breakthrough from Telefonica, Ericsson, and MATSUKO
- How Nokia is jumping on the FCC’s E-Band Ruling
Learn more about the Six Five Podcast – The 5G Factor at The Futurum Group.
Listen to the audio here:
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
Transcript:
Ron Westfall: Hello and welcome everyone to The 5G Factor. I’m Ron Westfall, Research Director here at The Futurum Group and today I am focusing on the major 5G ecosystem developments that have caught my eye and this includes Verizon’s $20 billion acquisition of Frontier. That’s right, $20 billion. Also, Telefonica, Ericsson and MATSUKO, I believe are advancing holographic call capabilities, which is pretty neat. And also the FCC has made an interesting ruling on the E-band, which I think gives an opportunity for Nokia to showcase some capabilities within their portfolio. So, hey, let’s jump right in because we have a lot of material today. First of all, Verizon and Frontier did announce that they have entered into definitive agreement for Verizon to acquire Frontier in an all cash transaction valued at $20 billion. That’s official now. Now, this strategic acquisition of Frontier, I believe, who markets itself as the largest pure play fiber internet provider in the US will have impact on the 5G market itself as well.
But also, and this is where a lot of the attention has been devoted so far, expand Verizon’s fiber footprint across the US and that can accelerate the company’s delivery of mobility and broadband services to both current and new customers. Also, it can augment Verizon’s Intelligent Edge Network for digital innovations related to AI, our new best friend over the past year and a half, as well as other important key technologies, and I’ll touch on it, such as IOT. Now, here are some basic facts of the deal that will help table set my deep dive. First of all, the deal will increase the scale with 2.2 million fiber subscribers added to the Verizon network and this will extend Verizon’s reach to 25 million premises across 31 states and Washington DC. Now, the good news for Verizon as well as Frontier is that there’s very little overlap between the two footprints across all these jurisdictions, so that should help ease the overall integration process.
Also, pre-deal, Verizon had about 18 million fiber locations growing at about 500,000 per year. And this is important because when you compare it to AT&T’s 27.8 million fiber passings that has actually been growing at a faster clip at 2.4 million per year, plus it has more locations pass through its Gigapower joint venture. So this really upped the ante for Verizon that they really needed to show that they have more game in terms of fiber deployments and being able to counter AT&T more effectively. Now, yes, the deal is projected to generate at least $500 million in annual run rate cost energies. Plus, and this is, I think, important to note that there is a little history here and some of it I think is a bit paradoxical. However, what happened is that Frontier acquired Verizon wireland assets in three states, worth $10.5 billion back in 2015, almost a decade ago. So in essence what has happened is that Verizon sold $10.5 billion of fiber assets to Frontier in 2015 to concentrate on its wireless business.
Subsequently, Frontier went bankrupt in 2020 and wiped $10 billion off its books. Yet now Verizon is buying Frontier for $20 billion to get more fiber assets. And to paraphrase John Malkovich In the Line of Fire, the irony here is so thick on Verizon’s back to the future move that one could choke on it. However, from my view, first of all, it’s a tribute to Frontier’s leadership under president and CEO Nick Jeffery in turning Frontier ship around that resulted in this Verizon $20 billion acquisition. Now, leading up to the deal, Frontier launched 70 gig fiber internet services to consumers across its entire fiber footprint. Also, in Q2 of ’24, the company added a record 92,000 fiber broadband customers resulting in fiber broadband customer growth of 18.6 year over year. So that’s impressive, really, by any measure. Plus, it delivered accelerating the revenue growth and continued strong EBITDA growth across its balance sheet.
As such, I believe Frontier in partnership with Nokia is the first company in North America to successfully trial broadband speeds of a hundred gig, 50 gig, 25 gig, and 10 gig pond technologies simultaneously all on its existing network. So you could see why Verizon was very keen on capturing Frontier’s capabilities and assets. Now, the important question is what does this have to do with the 5G ecosystem? I believe it has direct bearing and I have a few reasons why. Well, first of all, it quite simply enhance Verizon’s 5G infrastructure. The integration of Frontier’s fiber networks is ready to bolster Verizon’s overall 5G network by providing a more robust and extensive network. And this is quite simply crucial for supporting the high demands of 5G technology. They basically go hand in hand. Fiber is really the dominant backhaul technology or at least the preferred backhaul technology for many 5G deployments.
But again, there’s going to be variety in how it’s backhauled, but clearly that’s been the trend over the last few years. Second, it can improve network performance. With a larger fiber footprint, Verizon can offer better network performance including faster speeds, lower latency, which are critical for 5G applications such as 5G fixed wireless access or FWA as well as industry vertical services, including IOT devices. Now, in addition, it’s good for increased competition and this is, I think, something that the regulators will approve without too much concern. And then that the acquisition positions Verizon more competitively against other major telecom providers such as AT&T, I already addressed it, but also T-Mobile, which is also investing more into its fiber assets, and it has a T-Fiber offering right now, for example, as well as the cable operators who are also deploying fiber to complement and augment both their HFC services as well as their expanding mobile services.
So this is really about convergence. It’s really about the major operators in the US being able to compete against each other more effectively and being able to offer an array of choices. Many customers will look to bundle some of these capabilities depending on their situation, but also it will enable Verizon to reach more customers who would prefer a fiber service say at the home or at the business over say an FWA service. But vice versa, it will enable them to offer an FWA service when fiber is not available or it’s not cost-effective enough on a price point. So really, this is, I think, demonstrating that the convergence angle is very important, but also I believe will broaden Verizon’s ability to win more federal funds such as the $42.5 billion BEAD funds to help bridge the digital divide and meet society-wide broadband connectivity goals. So yes, it’s about expanding footprint, it’s about being more competitive, it’s about improving revenues and also all important revenue per customer and so forth.
But also it can make a difference in terms of meeting these very important society-wide goals and that is broadband connectivity for all. And so, that I think is going to be important for us to keep following. And I can bet by say October, I’ll be revisiting this acquisition and the impact that it’s having across the entire broadband market, including 5G. Now I’d like to turn to an application that has been around for a while and this is echoing quite simply AI. Now, AI has been around for many decades, but as we’ve seen over the last year and a half, AI has become a transformative technology that’s driving almost all the key decision-making in terms of investments and priorities, of course, across service providers, certainly cloud providers, but also enterprises and so forth. And what I’d like to shine a spotlight on is holography. Now, this has been around for decades.
I think we all know that. In fact, I fondly remember visiting the Museum of Holography in New York City back many years ago. I don’t think it’s around anymore, but yes, it was there and it’s something that captured the imagination for many years back, at least in the 20th century. What is new and different here is that we’re seeing the integration of holographic calls directly into dialer apps that would allow users to access and use advanced communication technology without the need for additional applications. In other words, keep it simple. Now, what we’re seeing is that Telefonica, Ericsson and MATSUKO, in collaboration, have successfully completed one of the most complex demonstrations of IMS data channel technology to date. Now, this proof of concept showcased the potential of IMS data channel to evolve 5G and 6G voice services with innovative applications. And naturally, this is including holographic communication.
Now, IMS data channel is a standard space technology that enhances existing IMS voice networks, which have also been around for many years. And as such could enable network operators and mobile service providers to deliver improved services ultimately to millions of users. Now, this technology is using built-in capabilities of the telephony networks such as quality of service, reliability, mobility, and security, while introducing these new capabilities for interactive and immersive communication. Now, since 2021, Telefonica has been executing various POCs with partners including, as noted, Ericsson and MATSUKO. Now, the goal has been to demonstrate the potential of integrating this technology into commercial services, especially 5G smartphones. So meaning this has impact potentially for existing technology and I’ll get into more detail here. Now, I think what we’re seeing here is that the recent POC focused on developing and testing holographic communication as part of the 6G-XR European project, which also aims to bring holographic communication closer to reality, quite simply.
The company successfully demonstrated holographic calls using IMS data channel that’s compliant with devices such as the Samsung Galaxy S series, which I use today. So this is pretty exciting on a personal level, but what I think is important here is showing where a colored face and torso can be captured and transmitted to real-time hologram to the receiver. So in this POC, each contributor played a critical role. And to break it out, Telefonica, which coordinated the POC activities and is ultimately responsible for providing the service, and as noted Ericsson, which is actually providing the IMS infrastructure and services to make this holographic communication reality hopefully on the horizon here soon, as well as MATSUKO, which is actually providing the holographic technology and applications for viewer and presenter.
Now, I believe the POC achieves a couple of key milestones. First of all, it demonstrated the transmission of a one-way hologram from the presenter to the viewer with a two-way audio between them, which is obviously important. We just don’t want the visual, we want the audio as well. And this is, again, using existing IMS infrastructure. Now, the holographic service was integrated into native smartphone dialers and this eliminates a need, again, for additional applications. I think this would be well received, quite literally, by any user out there. Now, also, I think what is important is that MATSUKO’s holographic service processed and reconstructed the hologram data in the cloud, and this as a result ensured high-quality performance. I think we understand the benefits of having cloud communication capabilities. It’s quite simply, can prove lower latency and other high-quality service outcomes by using it.
Now, that’s not to say that the POC did not face challenges. First of all, current 3GPP specifications lack standards for IMS data channel interface with third-party servers, which can quite simply impede broader implementation. And hopefully this will be resolved. This is something we’ve seen before. It’s just, again, the ecosystem getting together to develop more cooperation for, I think, a game-changing breakthrough. Now, bandwidth, the payload limitations for higher-resolution holograms were identified emphasizing the need for improvements in data segmentation and reassembly for better performance. So again, we’re seeing this all going on with ongoing say private 5G implementations and improving overall 5G quality. But I think the progress of 5G standalone deployments combined with the emerging 5G advance standard will help address these issues.
Also, addressing perfect synchronization between audio, again, and holographic video is still a challenge. However, I think it’s important to see that we are making progress here and an important POC that has key ecosystem players backing it up. Now, looking ahead, I believe the companies are committed to enhancing that user experience and the quality of the holographic services. I think that’s a no-brainer, but also they plan to focus on improving the user interface with features such as RGB background integration, 3D controls and better hologram manipulation. Also, they aim to improve the overall quality of the holograms, explore the implementation of two-way call. Quite simply, make it all the more interactive. Now, the teams here are working towards defining the necessary standards and interfaces to support the widespread adoption of IMS data channel technology. Quite simply, ensure it can be effectively used in the future applications.
And so, there’s some back, I mean, good news here and that is that IMS is already an existing technology, IMS data channel just needs to be better aligned with 3GPP. And as a result we can actually see I think that major breakthrough. And so, again, with holography, we’ve been familiar with it since say Star Wars, and I think it would definitely warm the hearts of consumers to actually have a real-world holographic service that they could just simply use on their 5G smartphone. But I think what’s also important here is that it’ll be useful for businesses and enterprises. I think holographic capabilities will be very important for things such as field tech performance. Also, quite simply, being able to improve designs, i.e., using it for virtual reality type capability as well as aligning with metaverse type capabilities. And so, that’s important for R&D and other important business applications.
So this is really across the board. It’s not just going to be kind of a whiz-bang cool gizmo for consumers, which I believe will be the case, but it will also be something that businesses will receive. And our friend AI, I believe can play a role here in how to make holographic technology all the better in terms of its quality, syncing with audio and so forth. Now, turning to the next topic, which is a little more I would say in the present, and that is recently the FCC released an order that is an R&O that introduced a relaxation, the requirements for antennas operating in the 80 gigahertz millimeter wave band or E-band, which are used for microwave backhaul transmission.
Now, why is this important to the 5G ecosystem? Well, first of all, this change has been discussed for some time and the Fixed Wireless Communications Coalition or FWCC has proved I think instrumental in driving the FCC rule change to allow the use of smaller antennas. Now, with the release of this R&O, it’s possible to use lower gain 38 decibel relative to an isotropic or dBi microwave antennas instead of the existing 43 dBi antennas. Now, the E-band wireless backhaul is typically used to connect cell sites in urban and downtown areas where sites require high capacity and short path lanes. Also, low-gain radios are a very good fit for short wireless links and such. Typical use cases include backhaul for small cell deployments, hotspots and pop-up events, which I think is gaining more traction as a use case. For example, music festivals, or also construction sites, and one I’m fond about is food trucks being able to use 5G capabilities to make the food truck service all the more better.
Now, to serve these E-band use cases, Nokia unveiled the Wavence Ultra Broadband Transceiver urban product, which is a high-capacity, ten-gig radio with an integrated antenna. That’s going to be important and what I’m about to discuss. Now, it’s designed to be, of course, fully compliant with the new FCC regulations and that as such can deliver fiber-like performance and is commercially available today. So this is today. So its impact I think will be felt over the next couple of quarters and also into 2025 plus. Now, as a competitive advantage, it’s so compact, this Nokia offering, that it can practically fit in the palm of a hand, which as such can accelerate deployments and time to value. Now, the Nokia offering is almost twice as small and lighter as competitive offerings as far as I can tell, especially since these competitive offerings, we still require external antennas that could quite simply drive that solution weight up almost to a three-fold level.
So I think this is something that Nokia will be able to take advantage of certainly in the near term in terms of more deployment of the new offering. Now, because the competing products are bigger and heavier, these solutions as the result require more installation infrastructure that includes enforced walls, additional supporting structures, as well as quite simply driving up site costs. Also, can be more difficult to get the required permission to deploy these relatively bulkier and heavier solutions at sites where visual impact is a key consideration. And the complexity of these solutions also increases the number of warehouse assets and spare parts required. I think everybody’s getting the idea here, quite simply, it’s less expensive. And also, I think this is important that what I’m finding is that Nokia advances credibility in the microwave markets transport segment and also fulfilling customer energy efficiency objectives. As we know, sustainability is a very important objective for all service providers, certainly the mobile service providers, but across the entire 5G ecosystem.
And so, by delivering a clearly differentiated product that immediately takes advantage of the FCC decision, I think that Nokia will, quite simply, gain more mindshare, and as such, gain more market share as well. And this I think is good news for the 5G ecosystem. And so, with that, that’s a wrap for today’s 5G Factor, and again, to our viewing audience and listening audience, as always, thank you for spending time on The 5G Factor. And don’t forget to bookmark The 5G Factor. We’ll be coming out with more episodes over the next few weeks, all about exciting cutting edge developments and so forth. And with that, I’ll look forward to seeing you all again and have a great 5G day everyone.
Author Information
Ron is an experienced, customer-focused research expert and analyst, with over 20 years of experience in the digital and IT transformation markets, working with businesses to drive consistent revenue and sales growth.
He is a recognized authority at tracking the evolution of and identifying the key disruptive trends within the service enablement ecosystem, including a wide range of topics across software and services, infrastructure, 5G communications, Internet of Things (IoT), Artificial Intelligence (AI), analytics, security, cloud computing, revenue management, and regulatory issues.
Prior to his work with The Futurum Group, Ron worked with GlobalData Technology creating syndicated and custom research across a wide variety of technical fields. His work with Current Analysis focused on the broadband and service provider infrastructure markets.
Ron holds a Master of Arts in Public Policy from University of Nevada — Las Vegas and a Bachelor of Arts in political science/government from William and Mary.
