With its eyes fixed on the massive amount of fiber that will be required to underpin its next-gen 5G wireless network, Verizon Communications agreed to a $1.05 billion, three-year minimum purchase agreement with Corning.
Under the deal, Corning will provide and for Verizon to buy up to 20 million kilometers (12.4 million miles) of optical fiber each year, from 2018 to 2020. Verizon’s initial deployment centers on Boston, where it’s already begun to expand its Fios network.
Fiber will serve as the “cornerstone, building block for the next-generation network, and that network is going to look very different than what we’ve built in the past,” Lowell McAdam, Verizon’s chairman and CEO, said Tuesday in an interview with David Faber on CNBC, noting that the company’s coming 5G network will beef up capacity and support low-latency applications like smart cities and autonomous cars.
“But you can’t do it if you don’t have fiber built deep into the network compared to what we’ve done in the past,” McAdam said.
While Verizon has leaned on fiber for its Fios network, the company expects it will have to drop six to eight strands of fiber to street lights and neighborhoods for its planned networks.
Corning, meanwhile, announced that it will keep up with demand by expanding capacity by way of a $250 million investment into its optical fiber-making facilities in North Carolina. “We have to put up some fresh steel to make this happen, Wendell Weeks, Corning’s chairman & CEO told Faber.
McAdam reiterated that Verizon will be testing 5G, initially as a fixed wireless system, in 11 markets this year. Those tests “will be very informative to us,” he added.
He also gave a shout out to FCC Chairman Ajit Pai and the work being done to facilitate small cell deployments.
Though Verizon appears to be taking a build vs. buy for now, Faber also asked McAdam if Verizon had its eyes on a “large acquisition” focused on infrastructure that can help with the 5G rollout amid rumors that Verizon has had its eye on Charter Communications.
McAdam didn’t rule anything out, but said “as we’ve looked at companies round the U.S., there’s nobody building to the architecture that we’re talking about” and that network investment “is going to be the cornerstone” of Verizon’s strategy.
“I think our shareholders expect us to look at every option,” McAdam said. “But I would tell you right now we haven’t seen the architectural fit and we haven’t seen a willing seller and a buyer that have a meeting of the minds.”