4G Wireless Technology Seen Bringing Changes In Speed, Prices

The next generation of wireless communications technology won't just change how quickly you can wirelessly download your favorite Lady Gaga music video. It also may affect your wallet.

The latest in the alphabet soup of technology acronyms comes in the form of Long-Term Evolution, or LTE--a fourth-generation, or 4G, wireless standard supported by many major telecommunications companies around the world.

If you haven't heard of it, you will, as the standard becomes more available over the next year. The 4G hype machine already has pumped out promises of higher wireless downloading speeds, thanks largely to advertisements from Sprint Nextel Corp. (S). Verizon Wireless also has started to beat its chest over the potential benefits of LTE.

Skeptics, however, say it still isn't clear just how fast the network will be once more people start using it, and warn against relying on the early speed claims. More importantly, though, the progression to 4G from the currently used third-generation, or 3G, technology may allow the carriers to implement something for which they have long been angling: A tiered pricing structure that enables them to charge heavy data users more money.

"The move to 4G gives them an excuse to play with the pricing model," said Rory Altman, a partner at consulting firm Altman Vilandrie & Co.

With mobile Internet traffic growing exponentially, carriers are increasingly dealing with individuals who drag down the network with their excessive usage. AT&T Inc. (T) says 3% of its subscriber base, likely armed with an Apple Inc. (AAPL) iPhone, make up 40% of the carrier's data traffic. AT&T Chief Executive Randall Stephenson said he expects the wireless industry eventually to move to a variable pricing model, but he hedged when asked if 4G would be the catalyst.

"I don't know what the exact trigger is," he told Dow Jones Newswires on Thursday.

The sentiment is one of the few things that Verizon Wireless, which is jointly owned by Verizon Communications Inc. (VZ) and Vodafone Group PLC (VOD), shares with its rival. On Wednesday, Chief Technical Officer Anthony Melone told The Wall Street Journal that unlimited-use pricing plans "is the big issue that has to change."

Many expect a tiered pricing model, in which consumers pay according to how much data they consume each month. It's similar to the monthly bandwidth cap of five gigabytes--the equivalent of downloading 14 half-hour television shows--that the telcos place on wireless data cards for laptop computers.

Initially, Verizon Wireless plans to sell data cards for its LTE network. But those caps, or some other tiered structure, may also apply to LTE phones. The carrier said LTE phones would hit the market by mid-2011.

One potential complication comes from customer confusion over how much data they are using. Phones don't usually provide a read-out of current data usage, and customers aren't used to keeping track of how many emails they're sending or how often they surf the mobile Web and watch videos.

Why would consumers pay more? With advertising for 4G hitting the airwaves, many could be convinced to pay the premium because they understand that the change represents an improvement in service.

On Monday, Verizon Wireless released an update to its LTE trials, claiming that the connection speeds were faster than the carrier had anticipated. The headline numbers: Peak download rates of 40 megabits to 50 megabits per second, or seven times faster than the fastest available 3G connection, were achieved. But peak rates are an example of ideal conditions, and the carrier followed up with the more realistic average download rate of five megabits to 12 megabits per second. A 3G connection at Verizon Wireless has a typical speed of around 1.4 megabits per second.

Beware the speed claims, industry observers say. It isn't clear whether consumers will get those rates, particularly as more people start to use LTE and as outside factors such as possible interference, distance to cell towers, and the number of users in the area are factored into the equation.

"As I look at LTE, it's much more about preserving experience that end users have now," said William Davidson, who runs global marketing for Qualcomm Inc. (QCOM). "I haven't seen a lot of people guaranteeing a lot of speed."

LTE backers boast of the technology's ability to deliver faster coverage to more people at a lower cost. In the beginning, the few people on LTE will see blazing speeds. However, as with 3G technology, the addition of more people to LTE service will begin to bog down the benefits of the network. The wild card comes from just how broadly it will be used.

"You can either get more speed or more people," said Harjot Saluja, vice president of product management at Airvana Inc. (AIRV). "The [speed] experience goes down with more people."

Rival AT&T, which will begin commercial trials of LTE next year, is skeptical of Verizon Wireless's claims.

"It's a little early for anyone to declare victory," said AT&T spokesman Mark Siegel.

Verizon Wireless expects to have LTE available in 25 to 30 markets by the end of the year, while smaller pre-paid wireless provider MetroPCS Communications Inc. (PCS) expects to have LTE available to many of its cities by year's end.

-By Roger Cheng, Dow Jones Newswires; 212-416-2153; roger.cheng@dowjones.com

(Niraj Sheth and Doug Cameron contributed to this article.)

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