Verizon to Roll Out 5G Network Late Next Year in 3 to 5 US Cities

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Verizon Communications Inc. (NYSE: VZ) announced on Wednesday that it plans to launch wireless residential broadband services in three to five U.S. cities in the second half of 2018 using 5G technology. The first city to get the service will be Sacramento, California.

The company said it has been running trials of the technology in 11 markets this year, using 28 GHz spectrum. Each of the locations offered a different set of obstacles to overcome, and Verizon’s chief network officer, Nicola Palmer, told a Dallas conference that the millimeter wave (mmWave) technology “propagates a little better than we thought.”

According to a Wednesday presentation to analysts, the pre-commercial trials yielded median download speeds of 1 gigabit per second (Gbps), although the range of download speeds narrowed as the distance to a node increased. A typical 4G/LTE network yields a top download speed of around 12 megabits per second (Mbps).

Verizon’s current broadband offerings are wireline based. In terms of subscribers, Verizon’s total of 7 million trails Comcast (25 million), Charter (23 million) and AT&T (16 million). All are wireline based and, as a result, difficult and expensive to expand.

5G nodes are to be mounted on poles or buildings and have line of sight access to a base station, but that’s still less challenging than installing new cable. The nodes send a wireless signal to a Wi-Fi modem inside a customer’s home.

Stringing cables from poles in cities requires local government approval and is costly, while digging up roads and yards to lay the last mile of wire is even more expensive and time-consuming.

The trade-off is that 5G technology is a little more finicky than wired technology and the technology is not fully detailed yet. Trees, walls, buildings and other obstructions can interfere with the signal. An international body is not expected to complete its final specification work until around 2020, so that could mean some changes will need to be made as the specification reaches its final form.

Verizon’s share price has bounced around over the past 12 months and is essentially right back where it started, as of the most recent close at $49.90. The 52-week trading range is $42.80 to $54.83, and the 12-month consensus price target is $50.48.