Verizon and AWS

Lots of people are wondering what Verizon is up to in its discussions with a number of Canadian new entrants.

Plenty of folks are giving reasons why it makes no sense; I’d like to understand why Wind Mobile might be worth the $700M being reported.

When you think of AWS players in the US market, T-Mobile is the carrier named most frequently. But Verizon has been busy acquiring AWS spectrum as well, with about $4B in deals to secure spectrum from cablecos: Comcast, Time Warner Cable, Bright House Networks and Cox Communications. According to a report in March, Verizon plans to add support for AWS to 5,000 of its towers by the end of this year, about a quarter of its total towers.

Verizon has been offering LTE devices that are equipped to run LTE on the AWS band. Its new Samsung Galaxy S4 will run LTE over AWS.

If Verizon acquires Canadian AWS spectrum owners, it may be a play to offer seamless cross border data roaming. Data roaming rates for US customers coming north of the border can run $2 per MB or $25 per 100MB. Demand for data by roaming customers can be expected to continue to grow with new, faster devices.

That is why I wonder to what extent is Verizon looking at reducing its settlement payments for cross border data roaming to justify a capital investment in Canada.

With the new entrants using AWS in Canada for HSPA, and the continued delays in Canada’s 700MHz auction, there is currently a challenge for Verizon to find  negotiating leverage in setting up roaming agreements for its LTE customers.

But this leads me to wonder what the impact could be on existing customers of the AWS new entrants in Canada. If it proceeds in acquiring a Canadian operator or two at bargain prices, would Verizon focus on quickly changing the Canadian networks to the LTE protocol in order to tear down the border for its US clients?

This may not bode well for current clients of the Canadian targets who will find their devices unable to connect to the LTE network. It isn’t clear that Verizon would target average Canadian consumers. Will Verizon even want to keep the low ARPU customers that are currently on Wind Mobile and Mobilicity, the Canadian networks under discussion?

On the other hand, if Verizon buys both carriers, with largely overlapping spectrum, it may signal a migration plan: move the customers of one network over to the other for HSPA, while converting the first network to LTE. Customers would need new devices to take advantage of LTE, but could still keep their existing HSPA service running..

To what extent is Verizon entering Canada in order to defend and extend its US roaming position? To what extent is Verizon playing hardball in its roaming negotiations?

Canada’s new entrants need a migration strategy for LTE in any case. Will Verizon be the catalyst to bring the new entrants together?