Verizon Looks Beyond Mobile to 4G

Each year at the Consumer Electronics Show, the industry puts on display what it hopes will be the next must-have gadgets. In January a new exhibitor will appear at the confab in Las Vegas: Verizon Wireless. The company plans to build a mammoth, two-story booth that will not be focused on hawking phones. Mostly, Verizon will be pushing its vision of a future full of wirelessly connected autos, refrigerators, MRI machines, and countless other devices.

Verizon's debut at CES is part of a larger campaign to get 4G into products not usually associated with digital high-speed networks. The U.S. mobile market is saturated, with 91 percent of the population already having a wireless plan. "Growth in the traditional business is slowing pretty quickly," says John Hodulik, a telecom analyst with UBS (UBS). Focusing on other kinds of products is "the best hope for the growth of the industry over the next decade."

Verizon says it has already persuaded manufacturers including Eastman Kodak (EK), LG, Samsung, and Dell (DELL) to start developing products to take advantage of 4G data speeds. Branching out from phones is also an opportunity for Verizon "to leapfrog its competitors," says Hodulik. AT&T (T) remains focused on upgrading its existing 3G architecture, and the commercial launch of its 4G network is still months away, according to John T. Stankey, president of AT&T's operations.

Verizon's ultrafast fourth-generation network uses a technology standard called Long Term Evolution, or LTE. Tim Horan, a telecom analyst at Oppenheimer, estimates Verizon is spending about $3 billion to upgrade its network to 4G service, which will launch later this year. While current third-generation networks allow for average download rates of up to 1.7 megabits per second, 4G customers can expect to see average download speeds of about 10 Mbps—fast enough to download a song in about four seconds. That's faster than many home broadband connections and zippy enough to stream live television to mobile devices. "Essentially we're taking that desktop experience and allowing you to take that with you on the road," says Verizon Chief Technical Officer Tony Melone.

The first products capable of surfing the airwaves at such speeds will be the obvious ones: LTE-enabled laptops will be available later this year, and smartphones will follow in 2011.

As Verizon's director of ecosystem development, Brian Higgins is responsible for getting nontraditional devices hooked up to the network. His team has built the LTE Innovation Center in Waltham, Mass. It's an 8,000-square-foot laboratory where electronics makers can test new products on a fully functional 4G network. Alcatel-Lucent and Ericsson Wireless (ERIC), which make much of the hardware that underpins the 4G network, have partnered with Verizon and provide the gadget makers in Waltham with design and technical support.

Ken Wirth, the president of 4G/LTE Wireless Networks at Alcatel-Lucent, says the new, high-speed network will be well-suited for data-intensive industries such as health care. MRI machines and CT scanners will be able to beam large, high-resolution images to portable devices used by doctors or patients, for instance. Alcatel-Lucent (ALU) has built several demonstration devices, including wireless glucose monitors for diabetic patients. Wirth says he expects the family car to become a 4G playground, with kids downloading video games and movies from the backseat. Even some home appliances, such as coffeemakers and refrigerators, will be connected, he says, to automatically communicate with repair technicians. Håkan Eriksson, the chief technology officer for Ericsson, says the wireless antenna will become like the electric motor—so common in cars and household appliances it will be taken for granted. "Everything that can benefit from being connected will be connected," he says.

Verizon is now replacing its Innovation Center with a bigger, 20,000-square-foot facility. The new center will house mockups of hospital rooms, kitchens, and garages to showcase LTE-ready products in realistic environments. The company hopes the Innovation Center and a $1.3 billion venture capital fund it is using to invest in some smaller companies will yield a large, growing customer base for its 4G service. "If you just build the network and wait for things to happen, you're going to be disappointed," says Higgins. It's also an early effort to pitch to a new type of customer. Persuading an appliance manufacturer to add wireless to its washing machines "is a completely different ball game than marketing a hot new handset to the residential market," says Craig Moffett, a telecom analyst at Sanford C. Bernstein (AB).

The bottom line: Verizon is encouraging makers of medical devices, home appliances, and other products to build around its new 4G network.

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