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Verizon Wireless planning major network upgrade

Updated: 2013-06-27T03:07:47Z

Bloomberg News

Verizon Wireless is planning a sweeping upgrade of its network this year after surging congestion and deteriorating speed allowed AT&T Inc. to close the gap on service quality.

Following years of Verizon dominating the industry in speed and service, its chief rival has jumped ahead. AT&T is now the performance leader based on speed tests conducted by RootMetrics and PC Magazine, meaning its network can deliver applications, websites and other data the fastest. Verizon says it’s starting service this summer on a network that is twice as fast, to regain its advantage and fend off AT&T and Overland Park-based Sprint Nextel Corp., which is being rejuvenated by money from SoftBank Corp.

Verizon’s challenge is congestion. The company is the most popular mobile-phone carrier and has continued to add millions more customers than any of its competitors, boosted by advertising and word-of-mouth about the speed of its network. All those users are soaking up the rich bandwidth that once gave Verizon its edge, in some cases bringing connections to a grinding halt.

“It’s a byproduct of their own success,” said Bill Moore, president of RootMetrics, a mobile- data analysis company. “All the traffic pushes the data speeds down, until they have to ramp it back up again.”

The network expansion is part of Verizon Wireless’ capital- spending plans of about $8.9 billion this year, similar to last year’s expenditures.

With AT&T’s data speeds on a tear, Verizon Wireless is playing catch-up, trying to manage its congested 2 1/2-year-old network, while working to get a new faster network online. The speed-test rating is a reversal for the two top wireless carriers. After years of facing complaints about poor service from users of Apple Inc.’s iPhone, AT&T has caught up and, in some markets, even surpassed Verizon in performance.

Verizon has been building the next phase of its long-term evolution, or LTE, network using advanced wireless services –or AWS – airwaves, a big portion of which were acquired last year from a group of cable companies led by Comcast Corp. Last month, the company started selling the first Nokia Oyj and Samsung Electronics Co. phones that can access the new network.

Verizon first started service on its LTE network in December 2010, nine months before AT&T debuted its LTE service. Verizon offers the service in about 500 U.S. cities and towns, while AT&T has service in about 300.

Speed isn’t the most important quality to focus on, said Mike Haberman, head of network solutions for Verizon Wireless.

“Speed isn’t sustainable, coverage is – and that’s the difference,” said Haberman. “We are a lot more consistent, even as we have more of a load on our systems.”

RootMetrics tested LTE speeds of the top four carriers in 77 cities and found that AT&T had “blazing fast” service of 18.6 megabits per second on average, while Verizon was second with “fast” service averaging 14.3 megabits per second. The report, which was released in March, also showed that the likelihood of getting on AT&T’s LTE network was 82 percent, compared with 93 percent for Verizon.

New networks tend to be faster because there is less traffic. “Congestion typically cuts speed by 25 percent,” Moore said.

Using the AWS spectrum, Verizon will have a 20-megahertz- by-20-megahertz channel, twice the capacity of the channel used on its original LTE network, Haberman said.

“We will have double the speeds,” he said. “Whatever speed they claim, in three months it will be dramatically different.”

While Verizon plans to start the faster service in major cities, including New York, this summer, AT&T will still have a leg up in many markets.

“You are always going to find issues of capacity constraint in cities like New York and San Francisco – it’s the nature of the beast,” said Michael Cote, an industry strategist with the Cote Collaborative based in Chicago. “There is no silver bullet.”

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