Verizon Wireless will start its faster, so-called fourth-generation mobile service Dec. 5, among the first U.S. carriers to debut such a network as competition for users who spend money on Web browsing and video intensifies.
Contracts will start at $50 a month, giving users 5 gigabytes of data, Verizon, the biggest U.S. mobile-phone carrier, said in a statement today. The company introduced two modems that allow laptop users to connect to the network and said it plans to unveil mobile phones for the service next year.
Verizon said the network, which uses technology called long-term evolution, gives customers speeds ten times faster than older 3G networks, eventually enabling features like high- definition video and live television streaming. Verizon is using the faster speeds to lure users from rivals such as AT&T Inc., the exclusive carrier for Apple Inc.’s iPhone, which won’t start a 4G service until next year.
“I would expect this to further cement the marketing message of the power and speed of the network,” a cornerstone of Verizon’s advertising strategy, said Michael Nelson, an analyst at Mizuho Securities USA Inc. in New York, who rates the shares “outperform” and doesn’t own any. Still, there’s no guarantee the network will lead to market-share gains, he said.
Verizon Wireless, based in Basking Ridge, New Jersey, and rivals are vying for customers as the pool of new users shrinks. There are enough mobile devices for 93 percent of the population, according to the CTIA mobile industry association.
Higher Data Rates
The average 4G data rate will be 5 to 12 megabits per second, more like what customers are used to from landline connections at home, Verizon said. The least expensive data plan is $9.99 cheaper than the comparable 3G modem plan. The new 4G modems cost $99.99 with a two-year contract, after a $50 rebate.
Analysts, including Tim Horan from Oppenheimer & Co., have estimated that Verizon is spending about $3 billion for the network upgrade. Verizon has said the buildout won’t impact its capital spending budget as the company has diverted funds from its fiber-optic television and Internet network, FiOS.
Verizon Communications Inc., which co-owns the mobile company with Vodafone Group Plc, rose 34 cents to $32.35 at 4 p.m. in New York Stock Exchange composite trading.
Verizon will unveil half a dozen smartphones and tablets for the new network in January and more devices will be on sale by mid-2011, Melone said. The company has said that it plans to reach two-thirds of the U.S. population with LTE in the next year and a half.
The service will cover more than 110 million people when it goes on sale this week, serving subscribers in Boston, New York, Washington, Southern California, Miami and other markets.
Sprint Nextel Corp. began selling 4G service via its WiMax technology this year through a partnership with Clearwire Corp. Sprint’s 4G Evo phone, made by HTC Corp., went on sale in June for $199.99 and features high-definition video downloads and video calling. Verizon’s backing may help the faster networks gain more popularity, Chief Technology Officer Tony Melone said on a conference call.
“LTE with Verizon behind it, and the scale we’re putting into it, will really make the difference,” Melone said.
AT&T, the No. 2 mobile carrier, will also use the LTE standard for its network. The carrier is upgrading to a faster 3G service before starting the 4G service next year.
“That matters because when we begin commercial deployment of LTE in mid-2011, customers on our LTE network will be able to fall back to” the upgraded 3G service, AT&T CTO John Donovan said on the company’s blog today. “Customers of carriers who chose 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.”
Carriers are targeting customers with faster speeds as smartphone use becomes more popular and accounts for bigger portion of revenue. Almost a third of U.S. mobile-phone users had a smartphone at the end of October, Nielsen Co. said today.
Verizon said that the portion of customers’ monthly bills that came from data plans increased 19 percent in the third quarter from a year earlier. Overall bills grew 1.8 percent.