Telecommunications networks are getting faster and more powerful. But they are also getting more energy efficient.

AT&T Inc. and Verizon Communications Inc. have both set goals for becoming carbon neutral in 15 years, with each company laying out a variety of initiatives aimed at reducing energy consumption and relying more on renewable energy. In announcing these goals, AT&T and Verizon joined a growing number of companies that have made carbon neutrality a priority. All told, seven of the top 10 information technology and telecom firms in the U.S., ranked by market capitalization, have either already achieved carbon neutrality or have set a timeline for it.

Notably, though, most of the early movers in this space have been in the tech industry, with Alphabet Inc.'s Google LLC becoming carbon neutral in 2007, and Microsoft Corp. achieving it in 2012. As integrated telecommunications firms, AT&T and Verizon face a different set of challenges — ones that will take new technology and innovative thinking to solve, according to the companies.

Powering the networks

For both AT&T and Verizon, a major priority is reducing the energy consumed by their telecommunications networks. According to Verizon's 2019 Environmental, Social and Governance Report, 91% of the company's emissions come from the electricity it uses to power its networks.

For 2018, the most recent year reported for Verizon in its 2019 ESG report, Verizon recorded Scope 1 or direct emissions totaling 385,241 metric tons of carbon dioxide equivalent, according to data from Trucost, a part of S&P Global Market Intelligence. Scope 2, or indirect emissions, totaled 4.0 million metric tons of CO2e.

Scope 1 emissions include all direct sources of emissions owned or controlled by Verizon, with the main categories being fuel for its fleet of vehicles, heating and powering its backup generators.

Scope 2, or indirect emission are generated off-site but purchased by Verizon.

"This includes electricity used within our wireline and wireless networks, our data centers, central offices and a smaller amount from our administrative facilities and retail stores," a Verizon spokesperson told S&P Global Market Intelligence.

Fiber efficiencies

Verizon is hoping to make its network more efficient through a series of upgrades, including migrating copper-based services to fiber technologies.

"Fiber has significantly more bandwidth capabilities than copper and requires less energy to transmit data than on older copper networks. Fiber also can transmit data further and requires fewer relay points, which gains additional efficiency," the Verizon spokesperson said.

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In addition to the reduced energy requirements, fiber-optic cables provide better reliability as they are largely immune to temperature changes, severe weather and moisture, all of which can hamper the connectivity of copper cable.

The move to fiber is also important to the rollout of next-generation 5G services. When fully implemented, 5G will offer download speeds many times faster than 4G LTE networks and usher in a new era of connectivity in terms of smart homes, offices and cities. The increased speeds and increased connections will create an immense amount of backhaul traffic, exacerbating the need for fiber backhaul services.

Virtualization

AT&T has also been transitioning its network from copper to fiber. The company also believes it will gain major energy efficiencies from virtualizing its network — that is to say, making its physical network software-driven.

"We will be eliminating significant portions of our energy-intensive network equipment in order to move into ... a very software-centric domain," Charles Herget, assistant vice president of environmental sustainability for AT&T, said in an interview.

This equipment can include things like routers, firewalls and load balancers, which telecommunications operators have historically used to deliver internet connectivity and mobile phone service.

"The added benefit of [virtualization] is that you don't need to have dedicated hardware — it's much more software intensive, and that means that it operates with less energy, or fewer emissions," Herget said.

According to Trucost, AT&T recorded direct Scope 1 emissions of 1.0 MtCO2e and indirect Scope 2 emissions of almost 6.7 MtCO2e for 2018.

Both AT&T and Verizon intend to achieve net-zero Scope 1 and 2 emissions by 2035.

However, neither of these goals includes Scope 3 emissions, which cover emissions from suppliers, business travel and all other upstream activities not captured in Scope 2. Verizon said it reduced the carbon intensity of its device supply chain by nearly 7% between 2017 and 2019. Meanwhile, AT&T is working to ensure that 50% of its suppliers set their own science-based Scope 1 and Scope 2 targets by 2024.

The other leading U.S. wireless carrier, T-Mobile US Inc., has said it is working toward powering 100% of its business and network with renewable energy. Since completing its merger with Sprint earlier this year, the combined company plans to set a target date that will be announced later this year.

Focus on fleets

Beyond the networks, Herget said AT&T is also paying great attention to its fleet of vehicles to help lower its Scope 1 emissions.

Already, the company is optimizing routes, transitioning to hybrid vehicles and reducing the overall size of its fleet. Between 2008 and 2019, the company was able to reduce fleet emissions by 31%.

But beyond that, in 2020, the company also became a flagship member of the Corporate Electric Vehicle Alliance. Herget said AT&T joined the alliance because it offers the company an opportunity to work directly with automotive manufacturers.

"We have administrative vehicles, we have light-duty vehicles, we have heavy-duty vehicles, and we have specialized vehicles," Herget said. Specialized vehicles can include mobile cell sites and mobile command centers deployed in extreme weather, as well as amphibious vehicles and emergency communications vehicles.

Part of AT&T's Network Disaster Recovery fleet Source: AT&T

"In order to ensure the supply within the next 15 years, we have to have great communication with the [original equipment manufacturers,] and they in turn are very curious to understand what our needs are because the vehicles are purpose-built," Herget said.

The Verizon spokesman similarly noted that while the company uses hybrids and full-electric vehicles in its fleet, "It is more difficult currently to match available choices from manufacturers to our specific kind of work. However, Verizon is at the table as better options are emerging in the marketplace."

Deloitte forecast in July 2020 that electric-vehicle sales will see a compound annual growth rate of 29% over the next 10 years, growing from 2.5 million in 2020 to 11.2 million in 2025, then reaching 31.1 million by 2030. Electric vehicles, Herget acknowledged, are "the future of transportation, and we need to be on the front end of those conversations to ensure that we get the supply and that it is correct."

Bottom line

Mitchell Krauss, a wealth manager at Capital Intelligence Associates, said many major companies and many large investors have realized the importance of taking a longer-term view when it comes to green and socially responsible investing.

"The number of companies thinking about quarterly profits over long-term results has shrunk," he said in an interview.

Krauss also noted that the cost of becoming more energy efficient is often more than offset by eventual savings.

"Sustainability done properly can increase growth and be good for the earth," Krauss said. "There's no reason in this day and age with all of the efficiencies that are in play that reducing carbon can't come with increased profits."