Verizon Wireless Prepares for the iPhone

There's no telling yet whether or when AT&T (T) might lose its position as the sole U.S. carrier of the Apple (AAPL) iPhone. But in the event Apple opts to partner with other mobile-phone service providers, Verizon Wireless says it's up to the task. Verizon Wireless has even made upgrades that would make its network more capable of handling extra traffic that would be generated by the iPhone, Verizon Wireless Chief Technology Officer Anthony Melone says in an interview. "We have put things in place already," Melone tells Bloomberg BusinessWeek. "We are prepared to support that traffic." AT&T has come under fire for the spotty performance of its network. Vexed by dropped calls and slow download speeds, some consumers say the company was unprepared for the surge in traffic that's resulted from iPhone use. Verizon Wireless in TV commercials has mocked AT&T's network coverage, and Melone says his company's equipment would do a better job catering to the heavy data demands of iPhone customers. "Absolutely, I think we could handle it," he says. Melone didn't address the prospect of landing a deal to carry the iPhone, though Verizon Wireless officials have in the past said they occasionally discuss partnerships with Apple executives. Earlier this year, the companies were considering releasing iPhone-like devices that would run on the Verizon Wireless network, people familiar with the matter said. AT&T Network IssuesAT&T spokesman Mark Siegel declined to address the readiness of the Verizon Wireless network, though he said, "We think we are leading the way in how people use their wireless phones. We operate a great network." Still, the company concedes the equipment isn't always up to snuff in key markets. On Dec. 9, the head of AT&T's wireless unit said the carrier was working to improve its network for smartphone subscribers in New York and San Francisco. Parts of those markets "are performing at levels below our standards," Ralph de la Vega, chief executive of AT&T Mobility, said at an investor conference. "This is going to get fixed," de la Vega said. "In both of those markets, I am very confident that you're going to see significant progress." At that same conference, de la Vega said the company would offer some subscribers "incentives" to "reduce or modify their usage" of bandwidth. The network run by Verizon Wireless, by contrast, often wins raves from U.S. consumers and independent reports. In a December 2009 survey by Consumer Reports, Verizon Wireless received the highest overall satisfaction score for wireless service. AT&T came in last. T-Mobile came in second and Sprint Nextel (S) came in third. Consistent InvestmentMelone credits the company's reputation to a focus on high network standards backed by consistent investments and a sophisticated troubleshooting program. Over the last three years, the company has invested nearly $19 billion in its wireless network, or about $6.3 billion a year. "It comes down to backing that process with money," says Melone. "We've been more consistent than any carrier in the last 10 years investing year over year." Verizon Wireless has also beefed up its network though acquisitions. In January 2009, Verizon Wireless closed a $27 billion deal to purchase the rural cellular operator Alltel. In acquiring Alltel, Verizon picked up a nationwide network with strong coverage in the Southeast and in Western states such as California, Nevada, and Arizona. In addition, Verizon runs a troubleshooting program that helps the company identify weak spots in its network. Today, Verizon operates 100 vehicles in which technicians literally drive on roads throughout the country testing the service of their own devices as well as devices of their rivals. That's up from 10 vehicles a decade ago. If techies find an area that has weak service, the company can target more investment to improve the quality of the phone call or the data download. "We understand very granularly where our network performs well and where it doesn't perform well," says Melone. "That's served us well, quite frankly." In fairness, the iPhone does seem to be imposing exceptional demands on AT&T. In the two years since the iPhone's debut, data traffic on AT&T's network has soared 5,000%. By contrast, Melone says Verizon's traffic has also been growing rapidly but at a slower pace. When asked to specify the growth rate, Melone said that over the last three years Verizon's traffic has grown as high as 1,000% year over year. But he declined to provide more details. Even so, Melone says the company is ready for the deluge should Verizon Wireless land a deal with Apple for the iPhone. "We will handle it if we ever get it," says Melone. Verizon Wireless believes it will be able to maintain its edge in network quality as the industry moves to so-called fourth-generation wireless technology. Such technology will let consumers download anywhere from 5 to 12 megabytes per second, up from about 1.5 currently. Next year, Verizon plans to roll out the technology in 30 of the most populated markets, finishing the nationwide rollout two years later. Verizon's early deployments will be focused on modems and wireless access cards for laptops. 4G handsets aren't expected to be widely available until 2011.

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