Verizon Wireless Makes the Correct Bet of LTE for Its 4G Future

On November 29th Verizon Wireless (VZW) announced plans to deploy its 4G mobile broadband network based on the 3GPP’s UTRAN Long Term Evolution (LTE) standard. Working with Vodafone (a VZW parent), trials will begin in 2008 based on equipment from Alcatel-Lucent, Ericsson, Motorola, NSN and Nortel. Beyond LTE network, device discussions include traditional handset suppliers (LG, Samsung, Motorola, Nokia and Sony Ericsson) and consumer electronics vendors looking to embed LTE into their offers.

Analytical Summary

► Current Perspective: Positive on Verizon Wireless’ announcement of LTE as its 4G, mobile broadband technology direction as LTE is the logical 4G choice for the carrier given its expected global scale and roaming opportunities, not to mention synergies with parent Vodafone. And, from a mere marketing standpoint, the announcement of 4G trials helps to combat the (admittedly battered) threat from Sprint’s WiMAX launch. However, the decision to go with LTE is not particularly surprising and it’s still not clear where the company will derive the bulk of 4G service revenues from (lots of narrowband consumer electronics connections, a smaller number of high-speed users, or both).

► Vendor Importance: High to Verizon Wireless, because a successful future 4G business depends on a solid supply of 4G devices and network components. The carrier’s vision of open mobile broadband networks supporting diverse devices and applications is compelling. To earn a return on its 3G and 4G CapEx, it may even be a necessity (targeting multiple, low-cost revenue streams per user). To convert this vision into a reality, however, LTE will need to be embedded in a wide array of business and consumer devices. Convincing manufacturers to support LTE will require them to see eventual demand and to make near-term commitments to the technology. The announcement should help accomplish that (especially by suggesting that Vodafone and U.S. GSM operators may follow its lead).

► Market Impact: Moderate on the enterprise mobility market as the key benefits of the upgrade as stated by Verizon Wireless are in the consumer space (although business devices and applications requiring higher speeds and innovative service options for video and “converged” services are also likely) and real-world services are many years away. U.S. GSM carriers are likely to choose the same upgrade path (LTE) anyway, but may be compelled to make this decision public sooner than they would have otherwise.

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Sprint and Clearwire Dissolve WIMAX Partnership Plan

On November 9th Sprint and Clearwire mutually agreed to terminate the letter of intent (LOI) signed in July 2007. The two companies could not resolve complexities associated with the LOI and failed to reach final agreement on the terms of the transaction. In light of this announcement, Sprint is reviewing its WiMAX business plans and outlook and the company expects to comment further on these topics early next year.

Recommended Competitive Responses

► Wireless competitors should suggest that this news is another indicator of an unstable company. In addition, the upgrade plans for EVDO and UMTS/HSDPA are well beyond the planning stages for major U.S. operators, and will serve the needs of most businesses for the majority of mobile applications anticipated for the next several years. As Sprint has not outlined its pricing, competitors should note that it is not guaranteed that XOHM would be priced below current 3G options in spite of its supposed bandwidth optimization and the economies of scale that come with a large ecosystem of vendor partners.

► Providers of wireline leased line or broadband wireline business services can add the instability of Sprint’s WIMAX strategy as evidenced by the dissolution of the Clearwire partnership to their other arguments regarding the limits of WIMAX technology, speeds and applications. They have already characterized WiMAX technology as being obsolete before it is even rolled out and slow compared to the current generation of 6 Mbps+ of cable, Verizon FiOS and ADSL2+.

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PODCAST
Verizon Business Reveals Integration Progress and Plans for Global Expansion

It has been nearly two years since MCI and Verizon formed Verizon Business, a global provider of communications services and solutions. During that period, the carrier has made substantial progress in the critical mission of integrating several networks, a multitude of services, tying together back office systems, thousands of employees and two corporate cultures to become one unified global service provider.

Despite the magnitude of this undertaking, the carrier has maintained a clear communications channel with its customers and the overall industry, providing updates and detailed information about its progress. In early November 2007, Verizon Business hosted its annual industry analyst conference where it presented an update on the progress of its integration efforts, and offered a glimpse of its roadmap for 2008.

Recurring themes throughout the conference were network consolidation and optimization to increase efficiencies and reduce costs; and development of managed services and professional services which come together in the concept of a “single stack” that focuses on solution selling and moving up the value chain. Verizon Business noted expansion into emerging markets and the delivery of a global portal for its MNC base. Verizon Business still has a long way to go before its consolidation is considered complete, but the carrier has made major strides in 2007 and has a clearly developed roadmap for future efforts.

Click here to listen to a panel of Current Analysis analysts discuss Verizon’s progress and vision.

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