Verizon's 4G Falls Apart

It is usually good to be first to market with a popular new technology. That is assuming, however, a company’s version of the new technology works. In the case of Verizon Wireless’s 4G superfast wireless network, the carrier’s reputation in the business already may have been damaged permanently by a series of service outages.

Verizon (NYSE: VZ) arguably had the number one brand in wireless service in the U.S. AT&T (NYSE: T) had nearly destroyed its because of trouble with its 3G network that was allegedly caused by data overloads from Apple (NASDAQ: AAPL) iPhone subscribers. Sprint-Nextel (NYSE: S) never had a particularly good reputation for service, and it suffers from its position as the third horse in a three-horse race.

Verizon had two choices, and it probably made the wrong one. It wanted to launch its 4G LTE network ahead of AT&T’s. Verizon also believed that it could flank the less-popular WiMax 4G technology that Sprint-Nextel deployed. WiMax is not compatible with the more widely adopted LTE standard. This likely made it less attractive to many customers.

Verizon’s 4G network has been down three times in the past month. Many customers will not forgive this. Many of those subscribers who can afford to break two-year contracts will do so. Others will wait until their contracts run out. If Verizon still has the problem as millions of 4G subscription deals reach the renewal stage, a migration to AT&T, Sprint or T-Mobile could become a flood of defections.

Verizon, early to market with 4G, may have undermined its chance to be a leader in the industry over the longer term.

Douglas A. McIntyre