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Verizon LTE Plan Not a Rural Slam-Dunk

Carol Wilson
6/18/2010
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Leaders of two rural telecom associations are cautiously optimistic about Verizon Wireless 's plan to partner with rural network operators to build out its 4G long-term evolution network in rural areas.

Kevin McGuire, vice president of business and technology for the NTCA - The Rural Broadband Association , and Stephen Berry, CEO and executive director of the Rural Cellular Association , think it's generally good news when a major telecom service provider talks about building broadband facilities in rural areas.

But McGuire, who has spoken with Verizon officials on this topic, warns that it is early days for these discussions, and Berry, who will be speaking with Verizon, remains concerned that Verizon's approach to building out LTE will still leave his members unable to use the 700MHz spectrum for which they paid millions.

Verizon said, as part of its plan to duplicate its 3G footprint with a 4G mobile broadband network, that it "plans to work with rural companies to collaboratively build and operate a 4G network in those areas using the tower and backhaul assets of the rural company and Verizon Wireless’s core LTE equipment and 700MHz spectrum."

Multiple Verizon spokespeople declined to comment further on what exactly Verizon plans to do. (See Verizon Says LTE Will Match 3G Footprint in 2013.)

The glass-half-full thinking on this for Berry is that Verizon is planning a rural buildout.

"It's good that they are talking about it, because before, as recently as a couple of weeks ago, Verizon said they had no plans to build out in rural America," Berry says. Conversations with some of the RCA's members may have sparked the change, he says.

But Verizon's plan for building out its 700MHz spectrum specifically excludes interoperability with the portion of the 700MHz spectrum purchased by rural carriers, Berry notes, and that leaves rural carriers out in the cold in terms of getting equipment manufacturers and, more specifically, handset manufacturers to build equipment for the rural markets, given the lack of economies of scale.

RCA members who purchased 700MHz spectrum paid more per PoP than Verizon or AT&T Inc. (NYSE: T) did, although that pair paid much more in absolute dollars to get national licenses, Berry argues.

"Our guys would have to buy 450,000 to 500,000 handsets to get scale, and that's not possible," he says. Without that, high-end handsets for use on rural networks could cost $1000 or more, which isn't competitive with what AT&T or Verizon would offer.

The glass-half-empty view of what Verizon is doing is that the carrier is playing "stall ball," Berry says, trying to convince the Federal Communications Commission (FCC) that it's actively building out a rural network in a cooperative way to forestall the likelihood that the FCC will mandate data service roaming in the same way it previously mandated voice service roaming.

McGuire's members are not generally in the wireless business -- many of them tried but were driven out by the difficult economics of competing with national players that have economies of scale in their favor, and for them, a Verizon partnership has more upside.

"Because it is very much in its infancy, in its formative stages, I'd have to say it depends on what the final agreement looks like," he says. "If it is going to be a win-win -- if you look at dollars and investment necessary for them, it meets their network expansion desires and the dollar savings and, for us, allows us to serve our customers and creates a lucrative business case -- then yes it's a good thing. Our concern is whether it manifests in this way."

McGuire says he expects many of his members that also offer wireless services and have acquired 700MHz spectrum to use it to offer fixed wireless services, delivering broadband to places where fiber or copper facilities aren't economically or technically feasible.

— Carol Wilson, Chief Editor, Events, Light Reading

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