Verizon is bringing broadband to rural America via its 4G LTE network, but the service's low data caps and high prices may still be out of reach for some consumers.
Verizon Wireless will soon offer its 4G LTE service to people who can't get wired broadband service. But the service won't come cheap. And there will be restrictions.
The company today introduced its HomeFusion Broadband service, which can deliver download speeds between 5 megabits per second to 12 Mbps and upload speeds up to 4 Mbps. The service is specifically intended for consumers living in places where DSL, cable modem, or fiber-to-the-home broadband services are not available.
The HomeFusion Broadband service will initially be available later this month in Birmingham, Ala., Dallas, and Nashville, Tenn. Verizon says it will add additional markets later.
When you look at the pricing and restrictions of the service, it's easy to see why the service would only appeal to those desperate for broadband.
Pricing for the HomeFusion service starts at $59.99 a month for 10 GB of data per month. Verizon also offers an $89.99 per month service with a limit of 20GB. And for $119.99, subscribers get 30GB of data for the month. Users also have to buy an antenna that is professionally installed on the outside of their home for $200.
By comparison Verizon charges $40 per month for a 3 Mbps DSL service. And it charges $55 a month for its 15 Mbps Fios broadband service, which also comes with a free Wi-Fi router.
Not only is the HomeFusion wireless broadband service more expensive than equivalent wired services offered by Verizon, it also comes with a pesky little data usage cap. This means that if the household exceeds 10GB, 20GB or 30GB of data per month, subscribers are charged an extra $10 per GB of data per month.
While these data usage caps may be more than enough for an individual smartphone or tablet subscriber, they are likely inadequate for an entire household that expects to do more than check e-mail each day.
According to Verizon's own data calculator, watching one hour of high-definition video per day uses more than 60GB per month. Streaming two hours of audio per day, uses more than 3.5 GB of data per month. And this usage is assuming there is only one person using the connection.
That said, the service can accommodate up to four wired connections and at least 20 devices via Wi-Fi, including laptops, tablets, gaming consoles, etc. But again, with these data caps, heavy broadband users would likely be paying an arm and leg for this service.
Instead, it seems that the caps make the HomeFusion service better suited for light Internet users. Of course, a truly light broadband user could subscribe to Verizon's much cheaper DSL service, which costs only $25 a month for speeds of 1.5 Mbps and no data caps.
The real issue here is the data caps. Verizon's LTE network service offers great speeds, but users are essentially penalized for using too much of that speed to access many of the services on the network. Meanwhile, no such data caps exist for any of Verizon's Fios and DSL packages. Subscribers of these services are able to use as much data as they like, streaming movies from Netflix or listening to streaming music services like Pandora. In fact, Verizon encourages unfettered usage as a differentiator from its cable rivals, who have recently begun talking about metering usage.
So why is Verizon restricting usage on its HomeFusion service? The answer is because HomeFusion uses Verizon's wireless 4G LTE network. This is the same network that Verizon uses to deliver wireless and Mi-Fi services for mobile devices. And because it's a wireless service, Verizon says it can't afford to offer unlimited usage. The company abandoned its unlimited smartphone data plans last year.
The problem is that wireless spectrum is a shared resource and its availability is limited. Unlike wired services, such as DSL and Fios, that provide a direct connection to a home with near limitless constraints on capacity, wireless services can become overwhelmed with traffic. And this degrades service for everyone on the network. To protect against heavy usage that might cripple the network, Verizon limits how much bandwidth is available to subscribers each month.
Why would anyone subscribe to this over-priced and limited service? That's a good question. The reason largely lies in the fact that in some places in the U.S. there are no wired broadband services. In 2008, only about 38 percent of rural American households had access to high-speed Internet connections, according to a study published by Pew Internet & American Life Project. This compared with about 57 percent of city dwellers who had access to broadband and 60 percent of people living in suburbs.
When Verizon first started building its 4G LTE network, the company said it would use the service to offer rural Americans broadband. The spectrum that the 4G LTE service uses is ideal for rural connectivity, because it propagates over longer distances and can penetrate walls and other obstacles.
It's unclear at this point whether rural consumers will buy the service or not. Perhaps they will if the only other alternatives are dial-up access or slow and expensive satellite broadband service. Hughes Network Systems, one of the largest satellite broadband service providers in the world, charges $100 for a 2 Mbps service with no data cap.
"It's a new product and we think there is a market for it," a Verizon spokeswoman said. "And we think people who have limited options will check it out. And the service will be competitive with other offerings."
One thing is clear: At these prices and with the data caps, Verizon doesn't have to worry about cannibalizing its DSL and Fios services.