Dick Lynch: 4G equipment trials this year, infrastructure in operation 2010-11
Talk to many financial analysts and you'd think that Verizon Wireless and Vodafone were locked in an unhappy marriage that both were seeking the most opportune time to end.
Vodafone owns a 45% share in Verizon Wireless, and has done for years. Yet some shareholders have from time to time called on Vodafone to sell its stake and give them the money. Meanwhile the Verizon group has sometimes seemed uncomfortable with the idea that a UK company owned such a big chunk of its mobile business.
The idea of an estrangement has been strengthened by the fact that the two companies have always used different technologies.
Vodafone is a GSM company, through and through. It was one of the founders of the project to develop the Europe-wide mobile that has now spread around the world. Verizon Wireless, on the other hand, has always been a CDMA operator. It chose a different technology, promoted by US vendor Qualcomm, for good reasons, but CDMA never really took off internationally despite its advantages.
"We have been a CDMA carrier since I made that decision back in the early 1990s," says Dick Lynch, CTO of Verizon Wireless and — since mid-2007 — CTO of the whole Verizon group.
"As a result of that we've always been 18, maybe 24 months sooner to market with product than the GSM path has allowed for. So we've had a 3G network here in the US for a considerable period of time now, and we've been very successful with it. We've had customers who have come to us because of it."
For years Vodafone and Verizon Wireless have followed the evolution of their technologies, from the original 2G (the first generation was analogue) to 2.5G and now 3G. Verizon went with Qualcomm; Vodafone took the GSM route, though that also now uses CDMA encoding in its 3G networks.
And at the end of November 2007 Vodafone and Verizon Wireless announced their allegiance to a joint 4G strategy. They will work on the GSM industry's project, called LTE, or Long Term Evolution. Verizon Wireless will not work on Qualcomm's own in-house 4G technology, Ultra-Mobile Broadband or UMB.
That doesn't put Qualcomm out of the picture. Verizon Wireless's 3G services will continue for many years, and Qualcomm has already announced that it is working with GSM companies on LTE.
But it means Verizon Wireless, with 65 million customers in the US, and Vodafone, with 252 million proportionate customers around the world, will be the most powerful force worldwide in the development of LTE.
The 300 million supergroup
That Vodafone number, for the end of 2007, will include about 30 million representing a 45% share of Verizon Wireless's user base. But even so, the effective total size of this supergroup is just a shade under 300 million — more than one in 10 of the world's mobile market.
The two partners will work with a number of network suppliers, including Alcatel-Lucent, Ericsson, Motorola, Nokia Siemens Networks and Nortel, in a trial due to begin this year.
So when Lynch and his Vodafone opposite number, Steve Pusey, walk into meetings at Nokia Siemens Networks in Espoo, or Ericsson in Stockholm, or Motorola in Chicago, executives take notice and, no doubt, stand to attention.
Device suppliers such as LG, Samsung, Motorola, Nokia and Sony Ericsson will also take notice of Vodafone/Verizon Wireless decisions. And not just makers of phones, PDAs and laptops.
For, according to Lynch, it's the wider market for wirelessly-enabled electrical goods that he has his eyes on.
Of course, there's a roaming side to the decision. As border-hopping Europeans and Asians know to their cost, GSM operators worldwide earn considerable revenue when international travellers roam onto their networks, or when their own customers travel abroad and pay to receive calls on their mobile phones.
Because of Verizon Wireless's technological isolation in the Qualcomm world, that revenue has been largely denied to it. Vodafone and other GSM customers visiting the US roam onto AT&T or T-Mobile, not to Verizon or the other large CDMA operator, Sprint. Verizon customers must acquire special phones if they need to stay in touch away from home.
"I started thinking, and looking through my window at the trees, and seeing airplanes go by, and these airplanes all say British Airways on them, or they say Lufthansa," says Lynch.
"So as we become more and more a worldwide economy we really need to think about the universality of the technology we're deploying."
But there's more. "I look at where we're going to get our devices from in the future," says Lynch. "I became convinced that I couldn't sell what we sell in the 2G and 3G world today in the 4G world. What we're really going to sell is capability for the consumer electronics industry to provide embedded wireless in all of their devices."
Consumer electronics companies already enough variables to cater for with mains power, he says. North American and Japanese mains sockets deliver 110 volts at 60 hertz; in Europe and many other parts of the world it's 230 volts and 50 hertz. And that's without the many different designs of socket.
"They don't need more variants," says Lynch. When they decide to embed wireless technology in their devices, they will want a standard that is available in as much of the world as possible.
"What I wanted to do was given them an opportunity to see that companies like Verizon and Vodafone and others have coalesced on a given 4G technology so that know what they need to build to."
There were several alternatives to LTE, he says. Apart from Qualcomm's UMB there is WiMax, which Sprint is adopting for its Xohm service, expected to be rolled out commercially later in 2008.
All three are similar technologies, each using a system called OFDM, for orthogonal frequency-division multiplexing. That means no single existing technology has a natural upgrade path: for everyone, it's a change of generation.
So Lynch compared the alternatives. "As a technologist I said, give me a comparison of the three. From a technology comparison, you find that all three to the eyes and ears and feel of the customer are virtually identical. One has a little bit faster downlink speed, another might have a little bit lower latency, but in the end all three of them are very close technologically."
So the opportunity for a world standard for 4G wireless, putting Verizon at the heart of the LTE movement in association with Vodafone, came to the top of Lynch's priorities.
The decision was recent, made during 2007 "as I understood all the various implications of the need for me to make such a decision", he says. "We came to that conclusion over a period of six or nine months before we made the announcement."
Now, he says, "I am very high on the opportunity of 4G. The reason I believe so strongly in 4G and its opportunity is because of the success we've had with 3G in this country. If we can do this with 3G, then what could we do if we had a technology that could be 10 times 20 times faster, had better latencies, was readily available to the consumer?"
And this is where the logic of his move from Verizon Wireless to the whole of Verizon becomes apparent. For a wireline provider, "4G really provides us with the opportunities to converge our services so that the customers can see the same thing on their screen, whether it's a wireless laptop or on their television set or wherever", says Lynch. "You can see I get really excited about the opportunity."
Economies of scale
So do consumer electronics companies as well. "They have conceptual product in their development funnels now," and they have been making the point that they wanted the economies of scale associated with putting in the same standard for Europe, Asia and North America.
This also fits in with Verizon Wireless's new open development initiative, which is designed to create an opportunity for independent vendors to design and sell terminal equipment.
In the CDMA world, more than in the GSM world, customers have had to buy their phones and laptop data adapters directly from network operators or other approved vendors. Verizon's strategy is intended to break that link.
"We have determined that the consumer wants to be able to bring speciality devices, unique devices that we may not sell, to our network, and utilise them on our network," says Lynch.
Verizon announced its ODI just a few days before its LTE collaboration with Vodafone, and Lynch confirms that they are related.
"The majority will still buy devices and services directly from us," he says. But there will be "specifications to which anybody who wants to build a device can look and comply", and Verizon will accept that such equipment is "safe on our network", so that customers "can do what they what they want the device to do".
ODI will start with Verizon's existing 3G network, but "I want to tell potential customers and potential providers of equipment about when we get to 4G and that LTE is the technology we'll be using".
So what sort of equipment is he thinking of, for the ODI in the 3G world and into the LTE world with Vodafone, apart from today's phones and laptops?
"When I say consumer electronics I'm talking about cameras that will have all the download capability for all the digital images that the camera will have taken," says Lynch.
"I'm talking about automobiles that will have tremendous amounts of capabilities beyond what are provided today. I'm talking about game consoles — any type of consumer electronics device that can benefit directly or, through additional functionality, benefit indirectly from a wireless connection on it."
He's not particularly focussed on phones and PDAs, or laptops and smart phones. "Will all of those play on 4G networks? They certainly will," he says. "But that's more business as usual. I'm looking to stimulate the new business."
If Lynch's decision to go for CDMA for its 3G strategy gave him an 18-24 month advantage, will opting for LTE lose that advantage. "There's less of a time differential, in my opinion, for the 4G technologies than there has been in the past," he says. "While there may still be a little bit of time-to-market benefit with the other technologies I believe that all the other reasons I gave speak to waiting for LTE."
So where are we and when will we see LTE? "We plan, working in conjunction with Vodafone, to do network equipment trials, infrastructure trials, on both continents, this year, 2008," says Lynch.
Some will be Verizon's traditional suppliers, some will be Vodafone's traditional suppliers, "and some that neither one of us is using", he adds. "We plan to do that this coming year."
Next year he expects to see initial devices, and will want to see how they work, and "how the network works for some small number of customers".
Then "we will be in a position to begin evaluating for ultimate selection the various infrastructure manufacturers". And contracts for infrastructure? "Some time in 2009 or maybe early 2010", he says, with some 4G infrastructure in operation "as early as 2010-11, but the timing of that isn't going to be dependent on the infrastructure availability", he adds.
"When will these unique 4G consumer devices become available? It's going to be the critical mass of those devices that will determine when we are going to offer services in the Verizon footprint."
Throughout this period, there will be a close collaboration with Vodafone. "From a technology standpoint, we have always shared with each other and collaborated with each other."
The new project, including IMS as well as LTE, "has brought our collaboration to a new level where not only are we sharing information and comparing notes, but we are dividing work among the companies", he says.
"Verizon Wireless is doing certain of the things and Vodafone is doing others, and we're taking advantage of the capabilities of both companies, so I would say that this is upped to a new level."
It's a "fallacy of the past" that Vodafone and Verizon didn't get along, he says, a fallacy that "needs to be debunked. Steve Pusey and I have a very strong relationship and we continue to collaborate."
LTE will not be Verizon's universal mobile technology, though. "Our announcement of LTE for 4G in no way shortens the life span of 3G technologies," says Lynch. "I truly expect that in 2015 and 2016 and maybe even beyond many if not the majority of our customers will still be on CDMA systems. I think that's a point you ought not to lose."
But he's excited about 4G, and exciting about its convergence with Verizon's fibre-to-the-home FiOS project — for which he's now responsible as CTO of the group.
Convergence will have benefits for the operator in terms of network simplicity, he says, "but the important convergence that we as technologists sometimes miss is the convergence of services for the customer".
FiOS is available in nine million US homes, and about a million already subscribe. "It is a high-speed video connection, a very high speed internet connection, and it's voice services — and those voice services ride on VoIP."
Meanwhile Verizon will be running VoIP on its existing 3G wireless network, opening up the possibility for "the convergence of feature sets between your home phone and your wireless phone", he says.
"Convergence is only defined narrowly by those who would not have the vision of a larger ability. We believe that video telephone is coming to the home and also to the [mobile] handset. Next year? No, but convergence is an evolution and it's going to get some time to get there," says Lynch.
"I don't believe we have even begun to enumerate all of the opportunities yet. We in Verizon will begin to build many of these features for the customers but we're not going to be the only provider."
This will create "a whole new business" of companies programming applications that will then be offered through the Verizon networks, fixed and mobile, to end users. If he's right, it will open up a huge range of opportunities for innovative companies. GTB