4G phones: The promise and the peril

Phil Goldstein

At last month's CTIA Wireless 2010 show in Las Vegas, many companies were buzzing about 4G phones. Sprint Nextel, of course, unveiled its first WiMAX phone, the impressive HTC Evo. MetroPCS chimed in, too, about its partnership with Samsung for an LTE phone.

Though 4G phones represent an enormous opportunity, I think carriers need to have strong marketing campaigns for 4G devices and services to be a success.

Both Verizon and Sprint insist that they're aware of the marketing challenges ahead, but they may be underestimating just how much work they have cut out for them. According to a recent survey of smartphone owners by research firm Compete, 59 percent of respondents said 4G is currently available on some smartphones. So, clearly, there's a bit of confusion in the marketplace.

Beyond simply explaining what 4G is and the benefits it will bring, carriers will have to answer the question: What can I do with 4G that I can't do with a 3G smartphone?

I spoke with both Verizon and Sprint about their marketing strategies for 4G phones, and while they didn't exactly spill their secrets, they did give hints on how they might address the market.

Jeff Dietel, Verizon Wireless' vice president of marketing operations, said Verizon's OEM partners "are doing a very good job in migrating to form factors that we believe will be very competitive." The key to Verizon's strategy, Dietel said, will be to explain that the progression from 3G to 4G is a natural one, and that just as subscribers have experienced improvements in processing power, screen size and vibrancy--epitomized by the Motorola Droid--they will see the same bump in 4G. "It's not a 180-degree turn from where we're heading right now," he said. "It's a natural progression from where we are right now." Dietel also said Verizon's marketing will focus on explaining the benefits of the network and the phone.

It's a wise idea to try to make the transition to 4G seem inevitable and natural, but smartphones still only make up a minority of devices in the U.S. market--albeit a growing one. I don't know if consumers who are still getting used to 3G smartphones will want to plunk down more money for a 4G smartphone, especially when 4G is something they're unfamiliar with.

Sprint has a more immediate challenge, considering that the Evo will be coming out this summer. I think it could be the device that helps Sprint turn things around, but the carrier will need to emphasize the core, practical benefits of the device.

Fared Adib, Sprint's vice president of product development, said Sprint worked closely with HTC to design a phone that maximized the advantages of WiMAX: a massive 4.3-inch screen, a kickstand so that users can watch movies comfortably, and an HD version of YouTube. Like Dietel, Adib said Sprint will emphasize both the network and the device.

"People want to have devices that work really well," he said. "However that magic happens, most consumers don't really care."

A key sticking point for both Verizon and Sprint will be price. Will the carriers be able to convince people that these devices are worth a premium? "We want to actually make this something that people want to adopt in masses," Adib said. "We don't want to price it outside the marketplace."

It's unclear what the pricing is going to be for 4G service relative to 3G service. Verizon appears set to go ahead with a usage-based pricing model for LTE. Sprint has been mum on pricing details for its 4G service when coupled with the Evo handset, but recent whisperings indicate the carrier will charge $10-$20 extra per month for the WiMAX service (in line with its pricing for its 3G/4G Overdrive device).

Regardless, there's clearly interest in this new wave of phones--Adib said Sprint has received more inquiries on the Evo so far than it did for the Palm Pre. 

Carriers need to make the most of their 4G marketing budgets by being targeted and specific--they need to make the case for why 4G phones should matter. --Phil