Verizon’s Network Upgrade Aims to Retake AT&T Speed Title

Verizon Wireless is planning a sweeping upgrade of its network this year after surging congestion and deteriorating speed have allowed AT&T Inc. (T) to close the gap on service quality.

Following years of Verizon dominating the industry in speed and service, its chief rival has jumped ahead. AT&T is now the performance leader based on speed tests conducted by RootMetrics and PC Magazine, meaning its network can deliver applications, websites and other data the fastest. Verizon says it’s starting service this summer on a network that is twice as fast, to regain its advantage and fend off AT&T and Sprint Nextel Corp. (S), which is being rejuvenated by money from SoftBank Corp. (9984)

Verizon’s challenge is congestion, said Bill Moore, president of RootMetrics. The carrier is the most popular mobile-phone service and has continued to add millions more customers than any of its competitors, boosted by advertising and word-of-mouth about the speed of its network. All those users are soaking up the rich bandwidth that once gave Verizon its edge, in some cases bringing connections to a grinding halt.

“It’s a byproduct of their own success,” said Moore, whose Bellevue, Washington-based firm analyzes mobile data. “All the traffic pushes the data speeds down, until they have to ramp it back up again.”

The network expansion is part of Verizon Wireless’ capital-spending plans of about $8.9 billion this year, similar to last year’s expenditures.

Playing Catch-Up

With AT&T’s data speeds on a tear, Verizon Wireless is playing catch-up, trying to manage its congested 2 1/2-year-old network, while working to get a new faster network online. The speed-test rating is a reversal for the two top wireless carriers. After years of facing complaints about poor service from users of Apple Inc.’s iPhone, AT&T has caught up and, in some markets, even surpassed Verizon in performance.

Verizon has been building the next phase of its long-term evolution, or LTE, network using advanced wireless services -- or AWS -- airwaves, a big portion of which were acquired last year from a group of cable companies led by Comcast Corp. Last month, the company started selling the first Nokia Oyj (NOK1V) and Samsung Electronics Co. phones that can access the new network.

More Cities

Verizon first started service on its fourth-generation LTE network in December 2010, nine months before AT&T debuted its LTE system. Verizon offers the service in about 500 U.S. cities and towns, while AT&T has it in about 300.

Speed isn’t the most important quality to focus on, said Mike Haberman, head of network solutions for Verizon Wireless.

“Speed isn’t sustainable, coverage is -- and that’s the difference,” Haberman said. “We are a lot more consistent, even as we have more of a load on our systems.”

RootMetrics tested LTE speeds of the top four carriers in 77 cities and found that AT&T had “blazing fast” service of 18.6 megabits per second on average, while Verizon was second with “fast” service averaging 14.3 megabits per second. The report, which was released in March, also showed that the likelihood of getting on AT&T’s LTE network was 82 percent, compared with 93 percent for Verizon.

New networks tend to be faster because there is less traffic. “Congestion typically cuts speed by 25 percent,” Moore said.

Doubling Speed

Using the AWS spectrum, Verizon will have a 20-megahertz-by-20-megahertz channel, twice the capacity of the channel used on its original LTE network, Haberman said.

“We will have double the speeds,” he said. “Whatever speed they claim, in three months it will be dramatically different.”

He denied that congestion is a concern.

“We are delivering on our promise to customers to deliver consistently reliable speeds over our 4G LTE network and disagree with any mischaracterizations of our network as ‘congested,’” Haberman said. “Our AWS spectrum deployment is designed to anticipate future customer demand and data traffic growth and continue to offer the same consistently reliable speeds that our customers enjoy today. Reports to the contrary are hyperbole.”

While Verizon plans to start the faster service in major cities, including New York, this summer, AT&T may still have a leg up in many markets.

“You are always going to find issues of capacity constraint in cities like New York and San Francisco -- it’s the nature of the beast,” said Michael Cote, an industry strategist with the Cote Collaborative based in Chicago. “There is no silver bullet.”

To contact the reporter on this story: Scott Moritz in New York at smoritz6@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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