Verizon's (NYSE: VZ) intention to deploy more small cells to expand wireless coverage for 4G LTE could be a gold mine wireless backhaul opportunity for a host of regional telcos like Cincinnati Bell, FairPoint Communications and Lumos Networks.
Fran Shammo, CFO of Verizon, told investors during the recent Deutsche Bank investors conference that in areas where it did not win AWS spectrum, it will consider deploying small cells and use fiber-based backhaul.
"Most of the capacity upgrades we are making in places like Chicago where we did not win AWS spectrum, we are doing a lot of small cell technology, a lot of diversified antenna systems and a lot of in-building coverage," Shammo said. "A lot of this technology is there and it's not expensive to deploy, but there is an opex offset to that because you have to run fiber to every small [cell] you put in there."
Since Verizon does not have wireline facilities in every market where it offers wireless, it will need to work with these telcos that are aggressively reinventing themselves as fiber-based broadband companies.
Interestingly, Cincinnati Bell, FairPoint and Lumos all revealed during their fourth-quarter earnings calls that they are seeing interest in small cell backhaul and fiber-based backhaul.
FairPoint ramps northern New England footprint: Up in northern New England, FairPoint revealed in its fourth-quarter earnings call that it has reached 1,100 of the 1,700 cell towers it serves with fiber. At the same time it said it continues to prepare for new small cell opportunities.
Paul Sunu, CEO of FairPoint, said during the earnings call that while wireless operators have their own deployment strategies for small cells, "I think we're fairly flexible and hopefully we can be a good partner for them as we were working through our cell tower backlog."
FairPoint is not a small cell backhaul novice. In 2013, the service provider won a deal with rural wireless operator CoverageCo whereby it provides copper-based backhaul on its existing telephone poles in northern New England.
Cincinnati Bell's big backhaul win: Cincinnati Bell may have left the wireless business when it sold off its wireless spectrum to Verizon Wireless, but the telco is poised to maintain a large foothold in Cincinnati's wireless backhaul market. Although the continued buildout of its fiber-based broadband network service Fioptics is a key focus, the service provider revealed that its strategic capital investments of $50 million to $55 million will be dedicated to other projects, including deploying fiber facilities to small cell sites.
Ted Torbeck, CEO of Cincinnati Bell, told investors during the fourth-quarter earnings call that the company has already won a small cell backhaul contract with one of the largest wireless operators.
"In addition to our success with Fioptics, I am also pleased to announce, we recently secured a $30 million, multi-year small cell agreement with a national carrier," he said.
Cincinnati Bell has an interesting advantage in being able to respond to wireless providers' backhaul needs. The service provider also retained a lot of its wireless engineering talent from its former wireless business so unlike other wireline-only telcos, it has a deeper understanding of the unique characteristics of how a wireless provider operates and can craft an appropriate small cell solution.
Lumos enhances its fiber reach: Like other regional telcos, Lumos Networks has made it a priority to become a fiber-based service provider serving a mix of businesses and wholesale wireless customers, a strategy that continued to take shape in 2014.
Driven by the buildout of its wireless backhaul-centric network Project ARK, the service provider continued an aggressive buildout strategy to cell sites and buildings. During 2014, it added 375 new FTTC sites and 250 unique fiber to the cell (FTTC) connections.
Tim Biltz, CEO of Lumos, said during the fourth-quarter call that the company expects to see more requests for proposals (RFPs) from its wireless carrier customers for small cell backhaul and dark fiber.
"In 2015 and '16, I expect that small cells and macro dark fiber sites will become a larger piece of our FTC mix, although the exact timing is very carrier and customer dependent," Biltz said.
By building out a network specifically targeting wireless backhaul opportunities Lumos will be able to more effectively control the experience it provides to new wireless backhaul customers it wins.
Just how big is the small cell backhaul opportunity? According to a new report from ABI Research, the market is forecast to exceed $5 billion by 2019.
While the small cell market and overall backhaul market are in transition, it's not hard to understand why these regional telcos are keen to take advantage of this trend. As Verizon and other large wireless operators move to enhance coverage and capacity via small cells or other means, you can expect these service providers to be responding with fiber-based solutions that fit their needs.–Sean