UPDATE: Bluegrass Cellular, Verizon’s first rural 4G partner comments at the end of the post. Verizon Wireless has set a high bar for other carriers with its 4G launch, including rural carriers that might be considering leasing 4G spectrum or service from the company.
When Verizon Wireless turns up its 4G network on December 5, customers will be able to obtain mobile broadband wireless service at rates as low as $50 a month for 5 gigabytes of data. The company said the network will support speeds up to 5 to 12 Mb/s downstream and 2 to 5 Mb/s upstream. An $80 monthly plan for 10 gigabytes will also be available—and if customers exceed their data rate on either plan, they will be charged $10 extra per gigabyte.
The pricing is lower than some stakeholders were expecting—and the question for rural carriers, particularly those considering leasing 4G spectrum or services from Verizon, will be whether or not to match Verizon’s prices.
Verizon Wireless also is offering relatively low pricing for the two 4G LTE USB modems that will support the service. A model from LG and another from Pantech will be offered for $99.99 after a $50 rebate with a new two-year agreement. It would appear that the carrier has made the decision to subsidize the equipment cost—another move rural carriers will have to decide whether or not to follow.
As mobile data plans begin to offer a lower and lower cost per bit, carriers will need to do all they can to help make their networks operate more efficiently. Verizon, like other major wireless carriers, has been upgrading the speed of connections to cellsites to support higher backhaul traffic levels. The company also benefits from having a sister company that has ample core transport capacity.
Rural carriers deploying mobile 4G networks, whether in partnership with Verizon Wireless or independently, could struggle to obtain the same cost structure as Verizon Wireless because they typically do not have nationwide backbones but instead must purchase that connectivity from another carrier. Like Verizon Wireless, they also will entail the cost of bringing substantial bandwidth to 4G cellsites, as well as 4G equipment costs. Those carriers partnering with Verizon Wireless could benefit from economies of scale by using the same type of equipment as that carrier. The question is whether those economies of scale will be sufficient to enable them to match Verizon’s pricing.
When Verizon Wireless announced its plan to work with rural carriers on 4G, it offered them two options. They could either least spectrum from Verizon and build their own network or they could let Verizon build the network and purchase service from that carrier on a wholesale basis. Verizon also said that rural carriers would obtain service most quickly by building their own network. And the only rural partner that Verizon Wireless has announced to date, Bluegrass Cellular, said it chose that option, in large part because the company was eager to see 4G up and running quickly.
Now that Verizon’s pricing strategy has come to light, rural carriers considering working with Verizon Wireless may find themselves rethinking which of the two partnership options to choose. If a carrier opts to let Verizon Wireless build the network and purchase connectivity from Verizon on a wholesale basis, the network construction costs and risks are shifted to Verizon, which might look like a more appealing option if the rural carrier decides it must match Verizon’s retail rates.
UPDATE:
Telecompetitor spoke to Bluegrass Cellular Vice President of Sales and Marketing Barry Nothstine later today. Nothstine said Bluegrass hasn’t made any determinations about pricing yet.
He declined to discuss details about infrastructure plans, but said, “As we look at economies of scale with LTE and bandwidth and services, it’s very important that we optimize our network so we’re able to contain costs.”
Nothstine added “We’re still excited about our prospects working with Verizon Wireless on LTE and its rural America program.”
