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Verizon Repeats on 3G

U.S. carrier Verizon Wireless is doing a song and dance over its plans to launch a nationwide 3G service base on CDMA2000 1xEV-DO (Evolution, Data Only) technology, two years after marketing its slower 1x RTT service as a true third-generation standard (see Verizon Touts National EV-DO).

In January 2002, the carrier was quick to spread the word that it was the first to offer third-generation services along the eastern seaboard, offering 1x RTT networks with speeds of up to 144 kbit/s (see Verizon Is Not the Nation's First).

The country's largest carrier has now announced plans to expand its two faster EV-DO deployments in Washington and San Diego to a number of "major" U.S. cities later this year, putting aside $1 billion for this new '3G' investment (see Verizon Catches Data Wave).

EV-DO networks crank up the data rate to a theoretical 2 Mbit/s, but offer between 300 and 500 kbit/s in the real world. This is at least five times faster than current U.S. cellular networks (CDMA2000 1xRTT and GPRS – see A Wireless Taxonomy for more detailed definitions).

Spokesman Jeffrey Nelson is unable to provide specifics on the cities involved in the service launch, dubbed BroadbandAccess, commenting only that the commercial network will be rolled out "by the end of the summer."

Nelson does, however, draw comparisons with the 1x RTT network buildout. "We initially went live with a big part of the east coast – Boston down to Washington, New York, and Philadelphia before hitting Los Angeles, San Francisco, and cities in between. I am not suggesting for one minute that map will look the same, but you can see we built out from one point. That's similar to what we will do here. We will go to strategic markets first and over time build out into the rest of the national market."

Despite previous EV-DO supplier agreements with Nortel Networks Corp. (NYSE/Toronto: NT) and Lucent Technologies Inc. (NYSE: LU) (for its San Diego and Washington networks, respectively), the carrier has yet to confirm equipment suppliers for the nationwide rollout (see Lucent Wins at Verizon, KPN and Verizon Does 3G With Nortel).

"No contracts are signed as yet," stresses Nelson. "We have had tremendous success with both Nortel and Lucent in our first two markets, but we have not signed any contracts for the continuation of buildout. When that happens, we will announce it."

Startup Airvana Inc., which is supplying Nortel with EV-DO equipment, certainly believes that it will be in on the action. Sanjeev Verma, VP of marketing and business development at Airvana, says that he is privy to details about which vendor's kit will be rolled out where, but he isn't telling.

"We're not publicly saying what cities and so forth," he says. "Wherever there is a Nortel footprint, there are additional opportunities for Airvana."

Meanwhile, both Lucent and Nortel remain tight-lipped on their chances of grabbing the lucrative deals, although Current Analysis' Peter Jarich believes each will play a part. "Given the early trials and deals, it would be a good bet that Nortel and Lucent are the ones making this happen."

Other industry pundits expect Lucent to dominate proceedings, reflecting its leading status in the CDMA market, with Nortel mopping up the remnants.

"We believe that Lucent traditionally supplies 65 percent of Verizon Wireless' network, and Nortel 25 percent," write Lehman Brothers analysts in a research note. "We consider this news to help build visibility into our 2004 and 2005 estimates for Lucent and Nortel. In our model for Lucent, we have been assuming that Lucent continues to generate more than $1.5 billion in sales from Verizon Wireless, as it has in each of the past three years."

"I wouldn't be surprised to see Lucent get the majority of that contract," concurs Nomura Holdings Inc.'s Dr. Richard Windsor.

Today's announcement comes as little surprise in light of the carrier's aggressive stance on network expenditure. Last month's Unstrung Insider report -- "Wireless Capital Spending 2003/2004" -- notes how Verizon Wireless is "not skimping on investment" as it continues to increase revenue, subscriber growth and profitability" (see Christmas Capex Cheer?).

Such ambitious plans are also expected to fuel further growth in rival carrier spending. "We believe that other carriers will be forced to increase investment in their networks in attempts to close the gap with Verizon," adds Lehman Brothers. "We reiterate our expectation of wireless capital spending increasing in 2004 by roughly 3 percent over 2003 levels."

— Justin Springham, Senior Editor, Europe, and Dan Jones, Site Editor, Unstrung

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