Verizon Wireless CTO spurns network outsourcing, posits on EVDO shutdown

BOSTON - Verizon Wireless' chief technology officer said he does not believe in network outsourcing, comments that imply the carrier's intention to retain direct control of its CDMA network and LTE rollout.

The remarks are notable in light of a recent Wall Street Journal report that Sprint Nextel is in advanced negotiations to outsource its network to infrastructure giant Ericsson. Neither Ericsson nor Sprint has commented on the issue.

"I am not a believer in outsourcing," said Tony Melone, Verizon Wireless' senior vice president and chief technology officer, during a question-and-answer session at Ericsson's Capital Markets Day event here. Ericsson is one of the suppliers for Verizon Wireless' LTE buildout.

Melone said Verizon Wireless has long worked to promote the quality and reliability of its network--he trumpeted that the carrier has spent $50 billion on its wireless network since 2000. Thus, Melone said, outsourcing its network operations wouldn't jive with the reliable-network image the carrier has spent billions pushing onto consumers.

Despite Verizon's apparent distain for outsourcing, the trend is growing. Indeed, research firm Gartner recently wrote that "carriers will need to experiment with different ways to transform the businesses and operating cultures in order to prosper," and cited Vodafone's outsourcing of its network operations to Ericsson as an example.

'Pricing is inhibiting'

During his presentation to investors, analysts and press, Melone also briefly stepped outside his role as a network and technology guru to address Verizon Wireless' marketing and service pricing. When questioned about the carrier's pricing plans for its forthcoming LTE service, Melone said, "I think the current pricing schemes will change over time."

Indeed, Melone said current mobile broadband pricing "is inhibiting the market," and suggested mobile data fees may change even before Verizon launches its LTE service.

The comments are notable considering Verizon Wireless' current strategy: the carrier charges $60 per month for Internet access with download speeds of between 600 Kbps and 1.4 Mbps, and caps usage at around 5 GB per month. The pricing is significantly higher than what most wireline carriers charge for Internet access at higher speeds. Such pricing is largely in line with Verizon's competitors.

EVDO on the chopping block?

Finally, Melone also dropped some interesting remarks about Verizon Wireless' eventual transition from CDMA to LTE. He reiterated the carrier's already announced rollout plans--commercial LTE service by 2010 and expansion thereafter--and noted Verizon Wireless would operate its existing CDMA network in parallel with is LTE offering. Melone said Verizon Wireless would continue to rely on its CDMA 1x network for voice traffic during its LTE rollout, noting that the technology is well-designed for such communications. And though LTE can simultaneously support voice and data communications, Melone said the carrier wouldn't force customers to migrate their voice calls to LTE initially. He said Verizon Wireless would support its CDMA 1x network at least through 2018 to 2020.

However, the same may not be true for the carrier's CDMA EVDO 3G network. EVDO is primarily designed for data communications and not voice communications. Thus, Melone implied the carrier's EVDO network would become redundant with the launch of the higher-speed LTE technology.  "EVDO I believe will have a much shorter lifespan" than CDMA 1x, Melone said.

Melone did not provide a specific timeline for the shutdown of Verizon Wireless' CDMA EVDO network, and the carrier likely will continue to maintain it as long as a significant number of customers retain and use their EVDO-capable devices. Nonetheless, the move has precedence; AT&T Mobility recently completed the shutdown of its 2G TDMA network, and Verizon Wireless did the same with its own analog network.

Related stories:
Sprint in 'final negotiations' on Ericsson outsourcing
Verizon may complete LTE buildout by 2014
Verizon says LTE will be here next year
How long can mobile operators institute data usage caps?

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