Verizon Slashes Wireless Costs

Verizon Wireless joined its parent Verizon on Monday in cutting the price of broadband services and effectively blunting the charge of competitive technologies, which in this case would be municipal Wi-Fi and WiMAX.

Verizon Wireless, which is owned by Verizon, the largest landline carrier in the United States, and Vodafone, one of the world’s largest wireless carriers, is cutting the price of its evolution-data optimized (EV-DO) service by 25 percent.

The company will also add seven new markets to its coverage area. That would bring the carrier closer to its goal of covering half of the U.S. by the end of the year.

Verizon Wireless will reduce its current monthly price for EV-DO from $79.99 to $59.99. The new price is considered relatively inexpensive by early adopters, but most of the consumer market may still consider it too high.

By way of comparison, last week Verizon Wireless’ parent company Verizon announced a low-end landline DSL service that is faster and probably more reliable than EV-DO for less than $15 a month (see Verizon, Yahoo in DSL Hookup).

EV-DO is a wireless communications technology that provides speeds of between 300 and 600 Mbps, or 10 times the speed of dial-up. EV-DO can work with cell phones, but it requires wireless providers to reserve large swatches of expensive wireless spectrum for data at a time when they are still having problems reliably accommodating the demand for voice.

But Verizon Wireless, which has been marketing EV-DO services for two years, has probably been spurred into action by the emergence of municipal Wi-Fi in cities such as Philadelphia and the fact that WiMAX, another competing technology, is moving into the testing phase.

In addition, the newly merged Sprint Nextel has made a substantial commitment to EV-DO.
“Sprint Nextel has adopted EV-DO as their target architecture, which basically requires them to deploy EV-DO in every base station in the U.S. Verizon has been a pioneer of EV-DO technology,” said Joe Nordgaard, managing director of Spectral Advantage, a wireless industry consulting firm. “A 25 percent cut goes a long way to getting early adopters like myself to sign up again because they are faced with the issue of contract renewal.”

Verizon’s move also makes the degree of difficulty higher for Cingular, the largest wireless carrier in the U.S., as that carrier continues to plan its launch of a competing wireless broadband service, according to Mr. Nordgaard.
“If Cingular is planning on entering the market near Verizon’s $80 per month pricing, Cingular’s business case for UMTS [universal mobile telecommunications system] just got a lot more difficult,” added Mr. Nordgaard.
UMTS is a worldwide standard for wireless data communication based on the global system for mobile communications (GSM) standard.

Municipal Wi-Fi
Many local governments have maintained that the major carriers have priced large segments of the population out of the broadband market, so they are undertaking the construction of their own broadband networks.

Because wireless networks require the least amount of upheaval from construction, many municipalities are looking to deploy wireless broadband as the technology of choice.
“We have been in Philadelphia and many other markets since 2003, so municipal Wi-Fi is competing with us,” said Jim Gerace, a spokesman for Verizon Wireless. “And as far as I can tell, WiMAX is still a service on paper only.”

Verizon Wireless added Baton Rouge, Louisiana; Charlotte, Raleigh, and Durham, North Carolina; Denver, Colorado; Louisville, Kentucky; and San Francisco and Sacramento, California, to its coverage area.

“Verizon Wireless has to begin really pursuing the EV-DO market and cultivating a knowledge base on that pursuit, or risk leaving it open for incursion from WiMAX,” said Mr. Nordgaard. “EV-DO will evolve to higher data rates and WiMAX is constrained by the availability of spectrum.”