When it comes to small cell strategies, which carrier will win?

When it comes to small cells, the Tier 1 U.S. operators have very big differences. Verizon Communications (NYSE: VZ) appears to be ramping up its small cell deployments while AT&T Mobility (NYSE: T) is scaling back on its plans. T-Mobile US (NYSE:TMUS), meanwhile has said it has no immediate plans to deploy small cells, while Sprint (NYSE: S) flat-out refuses to talk about a small cell strategy.  

In an investor call, Verizon CFO Fran Shammo disclosed that the carrier has added an incremental $500 million to its 2015 capex budget for network densification, a big part of which will go to small cell deployments.

During a conference call in February, Verizon Executive Vice President of Network Tony Melone (who announced his retirement in May) gave three reasons for the carrier's increasing interest in small cells: the high cost of spectrum as demonstrated during the recent AWS-3 auction, the increasing availability of fiber and the increasing amount of cooperation from utilities. Also, Verizon officials have pointed to increasing small cell use in markets, such as Chicago, where it failed to win spectrum in the recent AWS-3 auction.

Verizon is known to have small cells in operation or under construction in New York, Chicago, San Francisco, Los Angeles, Phoenix, Detroit and Cleveland. 

AT&T, meanwhile, is cutting back on its small cell efforts.The company, as part of its mammoth Project Velocity IP effort, originally had said it plans to have 40,000 small cells deployed by the end of 2015.  As FierceWireless reported in March, AT&T no longer plans to meet this goal. Officials cited AT&T's purchase of Leap Wireless as the reason for this change because the acquisition gave the carrier many more towers and additional spectrum. However, a source indicated to FierceWireless in March that the company has pulled back mainly because it did not account for the time and effort involved in deploying small cells and has a long checklist of legal and site-acquisition issues it must go through before deploying small cells. 

This step away from small cells is an interesting turn of events for AT&T. During 2014, the carrier spent heavily on TV advertising that built awareness of solutions such as small cells and distributed antenna systems (DAS).

Interestingly, T-Mobile has no immediate plans to deploy small cells. CTO Neville Ray said that T-Mobile's network is "already dense," in explaining the carrier's lack of interest in small cells. Via its purchase of MetroPCS, T-Mobile does have DAS in some cities, including Philadelphia and Los Angeles.

So far Sprint has refused to talk about small cells. Although Macquarie Research analysts Kevin Smithen and Will Clayton have predicted that Sprint has plans to deploy roughly 20,000 small cell sites by the end of 2018 using its 2.5 GHz spectrum, the company has not confirmed that report.  

So, which carrier has the best small cell strategy? Small cell expert Joe Madden argues that the right strategy depends on the carrier, as T-Mobile's amount of usage relative to its deployed spectrum is very low by comparison with that of Verizon.  According to a recent MoffettNathanson Research report, "T-Mobile has two-and-a-half times as much spectrum per post-paid equivalent subscriber as Verizon and 35 percent more than AT&T."

In my view, the need for solutions such as small cells and DAS networks is less of a macro issue and more of a local issue. Stadiums and arenas need them. Manhattan and downtown Chicago need them. Schools, universities, hospitals and fairgrounds need them. In short, anywhere people gather--in an era of rising usage, growing over-the-top video and routine usage of LTE--small cells and DAS networks are needed.

AT&T was wise to lead the way on small cells and may regret pulling back on such efforts. Verizon, belatedly, is making solid moves in this direction, learning that its XLTE deployment is helpful, but no panacea. T-Mobile should deploy more small cells in areas with dense traffic, especially now that the carrier's subscribership and LTE traffic are both headed northward. As for Sprint, the carrier appears to have a powerful vision for small cell deployment. However, Sprint's financial position and poor execution of Network Vision will give skeptics plenty of room for doubt. --Jeff