Facebook Seeks to Expand Global Wireless Connectivity, Unveils Terragraph and Project ARIES
Facebook recently unveiled crucial elements of its mission to extend high-speed wireless connectivity to urban areas as well as wireless connectivity to the vast tracts of the globe that either lack or are underserved by wireless providers. In addition to the solar-powered Aquila drone for enabling Internet access in remote areas, Facebook now also offers Terragraph and Project ARIES, both of which focus on using terrestrial antennas to cover urban and rural areas.
Terragraph is a 60 GHz, multi-node wireless system focused on bringing high-speed internet connectivity to dense urban areas. It equips lightpoles and other street utilities with nodes transmitting relatively short-range 60 Ghz signals at even intervals in order to increase the density of WiFi coverage in cities.
Terragraph leverages Facebook’s expertise of SDN solutions in combination with the WiGig standard, which was designed to provide in-room high-bandwidth communication and produces transmission rates as high as 7 Gbits. According to the press release, Terragraph uses “commercial off-the-shelf components and leverag[es] the cloud for intensive data processing” making the solution optimized for high-volume, low-cost production.
Project ARIES (Antenna Radio Integration for Efficiency in Spectrum), on the other hand, is aimed at servicing rural and remote areas, and packs a high volume of antennas into a large array in order to transmit connectivity over large distances. Facebook has dubbed this approach massive MIMO, using 96 antennas and supporting up to 24 devices simultaneously, and has reported that its ARIES prototype shows 10x spectral and energy efficiency gains compared to traditional 4G cellular systems. Given that 97% of the global population lives within 40 kilometers of a major city, Facebook plans to deploy ARIES in urban centers and project connectivity outward to surrounding rural areas.
Cell Tower Revenues Lifted by Steady Mobile Traffic Growth
The cell tower operator and wireless tower REIT (Real Estate Investment Trust) Crown Castle International’s (CCI) recently released Q1 earnings report exceeded the expectations of industry analysts, posting 9% gains to $799 million in site rental revenues compared to last year’s quarter. Its earnings before interest, taxes, depreciation, and amortization were $539 million, representing a 2% increase. Of the $799 million, small cells generated $96 million in site rental revenues, more than making up for the $79 million in small cells that CCI invested during that quarter.
As we reported earlier, CCI has engaged in a broader strategy of expanding its portfolio of tower sites in part out of confidence that steady growth in mobile data traffic and augmented need for bandwidth would generate enough demand for the services rendered by the towers. This business model is backed by long-term leases with the four major US wireless carriers (AT&T, Verizon, T-Mobile, and Sprint) who represent 88% of their site rental revenues.
Growing its global tower footprint is a business model that has similarly paid dividends for American Tower Corporation, which posted double digit growth in year-on-year revenue. It reported that it earned $1.3 billion in Q1 revenues, up 19% from last year’s Q1. American Tower’s U.S. tower properties, following a massive purchase of towers from Verizon, generated increased revenues by 13% to the tune of $718 million. CEO Jim Taiclet explained:
“The global proliferation of smartphones is driving significant growth in subscriber demand for higher bandwidth applications. As a result, during the first quarter, we continued to experience solid leasing demand across our served markets as mobile operators invest in their networks to manage key performance factors, including coverage, capacity and peak network speed.”
Verizon’s Dark Fiber Buildout Strategy Challenged by DISH
Earlier this year, Verizon inked a $1.8 billion acquisition of XO Communication’s fiber network. XO’s expansive fiber network covers 40 major metropolitan markets, 1.2 million miles of fiber, and an intercity network spanning 20,000 route miles between 85 cities. DISH has petitioned the FCC to block this acquisition on the grounds that it would cede too much dominance of crucial radio and fiber assets in the US to Verizon. The deal also provides for Verizon’s leasing of XO Communication’s wireless spectrum, which DISH argues would give Verizon near-total control of 5G spectrum, impeding competition and giving Verizon a stranglehold on the market. In its brief that it filed with the FCC, DISH stated its concerns:
“Stated simply, if the lease arrangement goes forward, licensed millimeter wave (“mmWave”) spectrum in a critical frequency range will be controlled almost exclusively by Verizon….Control over XO’s and Nextlink’s assets will substantially enhance Verizon’s already dominant position by aggregating substantial amounts of wireline and wireless inputs important to a number of communications markets. The competitive effects of the purchase of XO and the lease of spectrum from Nextlink are therefore intertwined, and the Commission should analyze the potential competitive harms of both applications together as a single transaction.”
XO Communications holds 91 LMDS spectrum licenses and 10 39 GHz licenses which service 45% of the US population. Verizon’s successful acquisition of XO’s fiber network would also eliminate competition between the two companies over mobile backhaul, Internet transit, and enterprise and wholesale markets, representing a massive coup for Verizon.
US Wireless Carriers Are Set to Commence 5G Trials
In the race to roll out commercially viable 5G in the US, Verizon reiterated its commitment to being number one. Verizon CFO Fran Shammo stated during a Q1 earnings call that the US telco is already engaged in testing at “sandboxes” and “innovation centers” in the US, going so far as to say that Verizon will launch in a few key markets by the end of the year. In particular, Verizon partnered with Nokia in field testing 5G networks in the Dallas-Fort Worth metro area, analyzing the latency and speed of the network on 73 GHz and 28 GHz bands with an aim to provide speed of multiple gigabits per second with a spectral bandwidth of 1 GHz and approximately 1 ms of latency.
Nokia noted that this represented an “extreme broadband” use case to examine the plausibility of replacing high-speed indoor wireline connections with wireless coverage in residential areas. The two companies stressed that they would roll out a pilot of fixed wireless 5G by 2017 at the latest. Small cell densification is also part and parcel of Verizon’s 5G coverage strategy, in order to enable high-speed video delivery over a wireless network in an efficient way.
Sprint announced recently that it would be engaging in field trials of 5G at the Centennial Copa America, a soccer tournament that is slated to run through June later this year in various stadiums across the US. Sprint is also partnering with Nokia in addition to Ericsson in order to demonstrate its 5G capabilities. Sprint’s CEO, Marcelo Claure, stated that Sprint is “participating in the development of the global 5G standard, and we’re collaborating with our partners and other companies on the 5G opportunity”. Claure also noted that Sprint views its 2.5 GHz spectrum as being at the low band spectrum of 5G, and that Sprint’s spectrum portfolio (comprising 150 MHz of 2.5 GHz spectrum in most of the top 100 US markets) has left the company well positioned for 5G.