Verizon to splash $1bn on wireless broadband spree

Verizon Communications plans to increase spending on its wireless broadband service by $1bn over the next two years, signalling a possible upturn in capital outlay by carriers.

The announcement is part of an overall broadband initiative introduced Thursday at the Consumer Electronics Show in Las Vegas by Verizon CEO Ivan Seidenberg. On a conference call with the press, Seidenberg said Verizon is committed to investing a total of $3bn in its networks over the next two years to bring broadband to the mass market.

That figure includes the increase in the wireless-service budget, along with $2bn earmarked for enhancements to the company's wireline network. While the money devoted to landline projects could turn out to be a reallocation of funds, a company representative confirmed that the $1bn promised for the wireless build-out will be in addition to funds already budgeted. In both 2002 and 2003, Verizon spent about $4bn on wireless.

The news of the wireless increase could be a good sign for the overall telecommunications market. The sector has suffered over the last few years as carriers have consistently cut spending amid disappointing revenue growth in their core telephone businesses. The Verizon announcement could indicate that telecom providers are ready to spend additional cash in new growth areas, such as next-generation wireless and voice over Internet Protocol (VoIP).

Ned Zachar, partner at Thomas Weisel Partners, said: "What we are seeing here from Verizon is a willingness to spend on wireless in order to build a good product. They've already proven that if they invest in the network and build a good service, that customers will follow."

The new wireless network is an expansion of Verizon's existing 3G data network, known as EV-DO, short for Evolution-Data Optimised. This network is expected to provide average user speeds of 300 to 500 kilobits per second and is expected to be available in many major cities in the United States this summer. It is currently available in Washington, DC, and San Diego.

Unlike with Wi-Fi wireless connectivity, users on Verizon's system, known as the BroadbandAccess network, can connect from anywhere within a service area; they don't have to be within a few hundred feet of a hot spot to get a high-speed connection.

Other carriers are also offering wide-area wireless connectivity for data. In November, AT&T Wireless Services announced its EDGE technology, which enables connection speeds of about 100kbps to 130kbps. Other wireless carriers, including Cingular Wireless, Deutsche Telekom's T-Mobile USA, Nextel Communications and Sprint PCS, also have plans to upgrade their services.

Verizon also announced two wireline products Thursday meant to tie together the broadband-in-the-home message. A new service called Iobi and a new hardware product called Verizon One are intended to help families and businesses create a personal network to manage their communications devices and activities.

The Iobi service lets customers manage phone calls, voice mail, calendars, address books and email using wireline and wireless phones, computers, laptops and PDAs. Verizon One, a combination of phone and personal computer, will be the device used by customers to integrate and manage the Iobi service.

Future landline projects include a planned fibre-to-the-home rollout and a conversion from traditional circuit switches to IP-based switches for its voice network. On Wednesday, Verizon announced that it had selected Nortel Networks as its exclusive supplier for VoIP gear.

During the conference call, Seidenberg was vague about whether those landline efforts would lead to an outright increase in capital spending.

"We are committed to spend $3bn," Seidenberg said. "If we see the economy and the industry move forward, we'll be more than happy to increase spending."

Marguerite Reardon writes for CNET News.com