Sunday, December 12, 2010

Verizon vs. Clearwire: A 4G Comparison

After much industry speculation Verizon Wireless finally commercially launched its LTE network on December 5th, 2010. The network has been launched in 38 cities covering approximately 110 million people. Major cities include San Francisco, Boston, Chicago, Miami, and Silicon Valley, among others, with nationwide coverage planned by 2011, and a full 3G to 4G upgrade by the end of 2013. The largest market in terms of both coverage and POPs covered is southern California, with 20 millions POPs covered.

Competition between Clearwire and Verizon, which are today the two largest 4G operators in United States, is now intensifying. Verizon will be offering very similar speeds as Clearwire and, starting 2011, more attractive devices including LTE smartphones and tablets.

However, in the short term I don’t believe Clearwire has much to worry about regarding Verizon’s recent announcement. Verizon Wireless’ LTE offering is disruptive compared to Clearwire's WiMAX offering. The former has introduced one LTE plan of 5 GB at US$50/month and another of 10 GB at US$80/month (both plans charge US$10.00 per 1 GB overage fee), compared to Clearwire’s WiMAX plans providing unlimited data for only US$45/month (users consume in average 7GB per month). 5 G might not be enough for most of Verizon’s customers, who are likely to turn to the 10 GB plan to satisfy their data needs. Consumers will know how much data they are using via Verizon text alerts when they reach the 50%, 75%, 90% and 100% usage marks.

Speeds for the two carriers’ offerings are about the same – 5-12 Mbps downlink for Verizon and 3-6 Mbps for Clearwire (with burst over 10 Mbps). It is doubtful from a customer point of view whether 6Mbps or 12Mbps downlink makes much difference. What Verizon’s customers will notice right away and will be happy about is the 10x increased speed of the 4G network as compared to 3G. Speed is important but so is latency. Verizon’s spokesman explained that the latency on its 4G network is half the latency on the 3G network, and almost near the latency a user can experience on a wired network.

Not only has Verizon priced its capped LTE data plans higher than Clearwire's unlimited 4G data plan, but its available LTE USB dongles (one from LG and another one from Pantech), will not compete against Clearwire's 4G smartphones (HTC and Samsung). There is a clear time-to-market advantage for Clearwire in terms of devices and cities covered. It has today more than 45 4G embedded laptops and netbooks, 2 smartphones and 4 USB dongles, while Verizon has only introduced 2 USB dongles. Although Verizon has said that more LTE device models will be available within weeks and will be 3G compatible, we believe that the real momentum for Verizon's LTE network will be by mid-2011, when the first LTE capable smartphones hit the market. Verizon has announced Ericsson and Alcatel-Lucent as key partners for its LTE network rollout to RAN infrastructure, Nokia Siemens and Cisco as suppliers of core IMS infrastructure, and LG and Pantech as initial device suppliers.

The greatest disadvantage for Verizon is that its LTE network capacity will be limited by its spectrum resources of 34 MHz in the 700 MHz band, as compared to +150 MHz in Clearwire’s 2.5 GHz band. Clearwire will leverage its superior spectrum assets to continue offering unlimited data plans, which Verizon will not be able to support.

All this sounds good for Clearwire: with approximately 4 million WiMAX subscribers, a wide array of devices, and a superior spectrum position than any other carrier in the United States, the operator has gained momentum in the last 2 years since its WiMAX/4G network was first launched. But one aspect that we cannot omit is the difficult situation that Clearwire is going through to gain additional funding to continue network development. Lack of funding in the coming six months will inevitably hurt Clearwire’s 4G position.

3G and 4G will be equally important for Verizon, at least in the short term. Verizon will leverage its 3G network to support voice and 4G network to support data applications, the two networks will work simultaneously. At some point in the future when its 4G footprint is larger, Verizon will put voice and data together on the 4G network, however VoIP over LTE will not be available but until late 2012 or early 2013.

The nature of the Verizon Wireless’ 700 MHz spectrum will allow lower initial deployment costs to achieve similar coverage as Clearwire, which is deploying in the 2.5 GHz band. This is offset by the differences between deployments: Verizon will blanket much more suburban, traffic corridor and marginal suburban areas than Clearwire. Therefore, its coverage will be about twice of Clearwire’s down the road.

Verizon’s LTE growth is dependent upon achieving nationwide coverage, which will not take place until 2011. Next year will witness a rapid pace of deployments and the introduction of a growing list of LTE devices. However, before rapid growth can take place, deployment first must mature, devices and services must be rolled out, and advertising campaigns must be mounted.

MARAVEDIS is a leading analyst firm focusing on disruptive technologies including smart networks using WiMAX, IEEE and 3GPP/LTE.

Author: Cintia Garza, Team Leader 4GCounts & Market Analyst CALA

source: LteWorld

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