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UPDATE: Verizon Picks LTE as 4G Wireless Broadband Path

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NEW YORK (Dow Jones) U.S. consumers are a step closer to using any phone on any network after Verizon Wireless laid out a technology upgrade path that many carriers around the world will likely follow.

The carrier's decision to use fourth-generation long-term evolution, or LTE, is important because it signals Verizon Wireless's willingness to operate a more commonly used network. Its current standard, called CDMA, isn't compatible with much of the world's carriers, which base their networks on a standard called GSM.

But LTE is an upgrade over a 3G technology called WCDMA, which is what most carriers, particularly in Europe, are employing as a third-generation technology. Verizon Wireless, in effect, is hopping from its own upgrade path to one likely shared by others.

The announcement, along with its surprising move Tuesday to eventually open its network to any device or program, marks a reversal of its previous preference for a closed network.

"Suddenly in a couple of years, we have a unified technology platform in this country again," said Roger Entner, who heads up the communications practice at IAG Research. "That makes that open platform announcement even more interesting."

AT&T and Deutsche Telekom's T-Mobile USA, which are both still working on their 3G networks, will likely use LTE down the line. Verizon Communications Chief Technology Officer Richard Lynch said LTE products could come as soon as 2010.

That leaves Sprint Nextel on its own. The carrier has committed to WiMax as its 4G technology, which isn't compatible with LTE.

"WiMax and LTE don't play well together," Lynch said.

Industry observers say Sprint may make the migration to LTE. There is rampant speculation the carrier may spin off or sell its WiMax business altogether. A spokesman for Sprint wasn't immediately available for comment.

Embracing Openness

Having a common network goes a long way toward an open environment similar to Europe, where cellphones can seamlessly roam among different carrier networks.

It also makes it easier for Verizon Wireless customers in the U.S. to eventually go abroad and use their phones. Nearly all Verizon Wireless handsets are incompatible in Europe and many other countries around the world. The carrier tested one Research in Motion Blackberry compatible with both networks, and is working on putting out similar devices.

"The company's move toward a 4G network is driven by our vision of pervasive wireless Internet connectivity and mobility," Lynch said in a statement issued Thursday morning.

Verizon Wireless parents Verizon and Vodafone Group have a trial plan that begins next year. They will employ all the major equipment makers such as Alcatel-Lucent and Ericsson. They are also working with the major handset makers such as Nokia and Motorola.

"In Europe, where the cellular operators have already invested heavily in WCDMA, LTE will be a more natural movement," said Nokia spokeswoman Laurie Armstrong. "This evolution is very strong in their agenda."

The 4G upgrade also fits well with Verizon Wireless' strategy to get more consumer-electronic devices connected to the cellular network. Lynch said he envisions most electronic devices using the 4G connection because he believes it will become the universal standard.

"The next generation isn't about supporting voice and messaging, it's about supporting all sorts of applications and devices emanating from the consumer-electronic manufacturers," he said. "Those guys aren't going to be able to go with multiple technology."

The carrier sees connected devices as a big opportunity and sees the early announcement of LTE as an early head's up for consumer-electronic manufacturers. Lynch added he sees the 3G network handling the voice and "light" data, while 4G handles the heavier traffic.

A Blow For CDMA

Verizon Wireless' decision to go with LTE is a blow to those looking for the carrier to follow the CDMA upgrade path. That includes Qualcomm, which champions a rival 4G technology called ultra mobile broadband, or UMB.

"It's a big hit to Qualcomm," Entner said. "They needed one of their big partners to do this. That was Verizon."

Qualcomm, however, said it isn't disappointed with the announcement.

"Whatever operators want to do with wireless broadband, we stand to benefit," said Bill Davidson, a spokesman for the company. He added that regardless of the technology, it will be able to manufacture semiconductors and license out technology.

"The industry wants to pick a winner and loser," he said. "We're supportive of both."

Qualcomm shares were recently down 15 cents to $41.40.

Lynch said Qualcomm will still provide LTE chips, and continues to have a strong relationship with Verizon. "I think Qualcomm will still be fine," he said.

But Perry LaForge, executive director of the CDMA trade association, said that, despite the LTE direction, EV-DO, which is what Verizon and Sprint currently use, will continue to have a major presence. He added that the "One technology fits all" or "One network fits all" strategy won't suffice in the competitive market.

Indeed, Entner warned that, while consumers will enjoy better handsets and easier access, the networks may suffer from a lack of innovation.

"You don't have two competing technologies that drive each other relentlessly forward," he said. "There's no other technology with a sizable deployment trying to show you up."

Verizon isn't disclosing how much it plans to spend on its 4G network, but Lynch estimated it would be comparable or less than its 3G buildout, since much of the infrastructure built out can be reused during the upgrade. Back in 2004, Verizon Wireless said it would spend an additional $1 billion through two years to build its 3G network. The carrier spends $5 billion annually on its overall network.

Shares of Verizon Communications were down 2 cents $42.39 in recent trading. Shares of Vodafone were down 2% at $37.47.

-By Roger Cheng, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com

(END) Dow Jones Newswires

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