Is LTE enough for Verizon Wireless?

Lynnette LunaCertainly the big news this week is Verizon Wireless' (NYSE:VZ) impending launch of LTE in 38 markets on Sunday. (See this related story). And the question in my mind is whether Verizon will have to innovate some more on the CDMA side.

Verizon has always adamantly denied any plans to implement any further major upgrades on its EV-DO network, and I don't doubt that at this point. But how fast the operator can build out LTE and a CDMA iPhone that seems so certain next year may change the operator's strategy.

Verizon has plans to offer extensive LTE coverage. In each of the markets it is launching on Sunday, at least 70 percent of that market is covered. Collectively, the markets have a population of more than 110 million POPs, and Verizon plans expand its footprint to cover roughly 200 million pops by 2012, and to more than 285 million by 2013. But it is relying on its slower 3G network to bolster coverage in the interim.

AT&T (NYSE:T) CTO John Donovan was quick to point out in a company blog that not only does HSPA+ offer speed performance to initial LTE deployments, but when AT&T commences its own LTE rollout in 2011, its customers will fall back on HSPA+ and receive a more consistent mobile broadband experience.

"Customers of carriers who choose not to upgrade their current networks will move in and out of LTE coverage areas as well. But as they do, they'll experience a jarring speed degradation," Donovan pointed out in an obvious dig at Verizon. "If they're online and on the phone when they move to sites that don't support simultaneous voice and data connections, they'll drop one of those connections. And if they're watching video, it's not going to be pretty..."

Indeed, Verizon touts its LTE network as 10 times faster than its 3G network, a jarring speed degradation indeed if a user moves out of the LTE coverage area.

Moreover, it seems like a pretty sure bet that Verizon will be getting its hands on the coveted iPhone next year, and the device will reportedly run on CDMA. Talk about renewed interest in CDMA! Might Verizon be forced to bolster its CDMA network then? Granted, Verizon CTO Tony Melone said during the company's conference call yesterday that the move to LTE "provides more head room in the 3G network to provide more and more services there."

But how fast subscribers flock to LTE depends on Verizon Wireless' marketing prowess. Right now Verizon's LTE pricing plans are not innovative given the fact that they are no different than what Verizon offers on the 3G side. Melone promised that the network will evolve and sport new and innovative pricing plans. We just don't know when that is and how competitive LTE smartphones will be with 3G smartphones in terms of form factor.

Interestingly, some international operators are beginning to realize the LTE alone will not be enough for them to compete in the mobile broadband world. Japan's KDDI recently declared that it will rely on LTE, CDMA Rev. B, WiMAX and WiFi to meet the expected demand for mobile broadband services.

Will LTE be enough for Verizon? The operator is certainly hoping so as it shells out billions for the brand new network. The last thing it wants to do is spend more on its legacy network. But it may not have a choice. --Lynnette

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