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Verizon Looks For More Spectrum, But Will Users Pay?

March 7, 2012

Peter Suciu for RedOrbit.com

While it is something that we can´t see, and technically something we all “own,” wireless spectrum is becoming on the one hand very crowded, and on the other hand even more costly to use. The irony is that it wasn´t meant to be this way.

There was the promise of anywhere broadband with smartphones that could do more.

However, as more and more mobile customers look to get smarter with smartphones, the existing spectrum just simply can´t handle all the downloads, tweets, streaming content and even good old fashioned phone calls. The solution for carrier Verizon Wireless is to get another slice of the spectrum, and it looks to make the move from 3G to 4G LTE.

As noted by The Wall Street Journal this week, Verizon Communications is looking to pay $3.9 billion for wireless airwaves from a group of cable-television companies including Comcast Corp., Time Warner Cable, Bright House Networks LLC, Cox Communications Inc. and Direct TV Group. Its rivals, including Sprint Nextel Corp. and T-Mobile USA have in turn called upon federal regulars to suspend the usual 180-day review period, and also seek to have Verizon Wireless disclose more information about the deal the company has with the carriers.

Opponents, who even include some members of Congress, have claimed that the Verizon and cable company partnership would reduce competition in the marketplace and even eliminate some jobs. Meanwhile, however, supporters of the deal say that this would allow Verizon to make use of spectrum that was previously unused and provide new services in the process.

This of course follows AT&T´s failed attempt to buy T-Mobile, so there is no guarantee that Verizon will get the green light at any rate.

Will Consumers Pay More for Less?

Verizon could certainly use the added spectrum as it looks to bring its 4G LTE network to rural America, but users could find themselves with high prices and low data caps — not exactly the sort of things that make for good selling points when introducing a new service.

Introduced this week, the HomeFusion Broadband service reportedly delivers download speeds between 5 megabits per second to 12 Mbps, with upload speeds up to 4 Mbps. This service is also being aimed at those where DSL, cable modem and fiber-to-the-home broadband services are not readily available.

HomeFusion Broadband will be available later this month in Birmingham, Ala., Dallas, Tex. and Nashville, Tenn. with additional markets to follow later this year.

Pricing starts at $59.99 a month with 10GB of data, and also includes $89.99 for 20GB and $119.99 for 30GB of data. Users who exceed the cap will face $10 per GB of data per month.  In addition users have to purchase an antenna, which needs to be professionally installed for an additional $200.

By comparison Verizon offers its FIOS service, which even includes a free Wi-Fi router for $55 a month for 15 Mbps.

The reasons for those high costs — the antenna excluded obviously — is because HomeFusion is utilizing the 4G LTE network, which also has a cap on data usage. And that data can be used up very quickly.

Just a single hour of high-definition video per day could use more than 60GB per month, and even those who prefer to spend  a day listening to music could face overage charges, as two hours of streaming music could result in 3.5 GB of data each month.

Is 2G to be or Not to be…Shut Down?

One other issue that has put the air brakes is that some older phones are taking up spectrum that could be better optimized. In other words those 2G users need to get with the program and upgrade, so that the older spectrum can be better developed.

Marketwatch noted this week that AT&T is urging customers to upgrade from the older 2G devices for ones that can run on the 3G networks.

“Your current, older-model 2G phone might not be able to make or receive calls and you may experience degradation of your wireless service in certain areas,” AT&T told customers in a letter.

That´s certainly one way to keep customers happy, tell them they have to pay you to replace their devices to keep using your service!

AT&T is also looking to improve its 3G service with faster technology known as HSPA+ as a way to keep pace with Verizon´s 4G LTE.

Built it, but Will They Come?

The other part of this equation is whether the push to 4G LTE from Verizon is being pushed out before it can be fully utilized by consumers. As a recent Saturday Night Live skit noted, there is still much confusion.

When the would-be Verizon salesman explains 4G LTE, the response from the fictional (but mostly realistic sounding) consumer says, “So what does that mean?” When told “you can run your entire small business from your smartphone,” the response is “I wouldn´t want to do that.”

When pressed with phones and other options that could make it possible, the response is spot on, “that sounds terrible.”

And that really sums up the problem as much as the solution. Are people even running their small businesses from their phones? And if they are, they could be in for a world of trouble at some point.

Verizon, AT&T and the other carriers keep pushing their 4G services and don´t really have the spectrum in place in the first place. Instead of building the infrastructure for tomorrow, the carriers are pushing more devices and services and can barely keep pace with the users today.

In turn the users are punished with higher fees, and pay yet even more should they exceed the usage caps. For those in rural areas the 4G LTE could be a good solution if other broadband isn´t available, but those high costs will likely remain a deterrent — and coupled with the fact that it will only further crowd the already crowded spectrum suggests Verizon is looking at the opportunity today instead of the problem facing tomorrow.

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Source: Peter Suciu for RedOrbit.com



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