Fall 2010 Newsletter | www.eldorado.com

Why I’m Switching My iPhone to Verizon

sm_irwin3Despite their love affair with the iPhone, the general consensus among U.S.-based users of the device is that they are frustrated and unhappy with AT&T, the exclusive U.S. carrier.

While AT&T has benefited from having millions of new iPhone-using customers, the company is struggling to keep up with the growing demand for bandwidth from iPhones, BlackBerrys and other smartphones. 

AT&T isn’t alone. All mobile carriers are faced with huge capital investment decisions to be able to keep up with the growing bandwidth demand. 

The main culprit driving bandwidth demand is mobile video, which hogs much more bandwidth than any other wireless app. A recent forecast by Cisco Systems estimates that global mobile data traffic will double every year through 2014, and that by 2014, 66 percent of all mobile data traffic with be video. Mobile video data traffic is forecast to grow at a compound annual growth rate of 133 percent through 2014. 

Most users don’t think about the technology needed to deliver streaming video and other data to their phones, but it’s pretty complex. We all know about cell towers, but that’s just the most visible portion of the system.

How does data get to and from the cell towers? That part of the system is called “backhaul.” It’s the segment of the business that startups such as Tower Cloud (an EDV portfolio company) and Telecom Transport Management, Inc. specialize in. Increasingly, cable companies such as Comcast, Cox and TimeWarner are also entering the market.

Traditionally, cellular carriers have connected their towers through copper T-1 phone lines. But T-1s can’t handle the load anymore, and carriers are now looking to fiber optic cables and point-to-point wireless links to increase capacity. Tower Cloud is a leader in delivering end-to-end SONET and Ethernet solutions from cell sites to the carrier’s mobile switching center using highly reliable fiber and licensed microwave technologies. Tower Cloud and other backhaul providers work with all of the national carriers, including AT&T, MetroPCS, Sprint, T-Mobile and Verizon. 

Among these national carriers, Verizon is investing most aggressively in putting in place both a national 4G LTE network and a nearly entirely new national backhaul network to support the launch of 4G.  This is a significant long-term bet by Verizon, and one which AT&T isn’t matching. 

That means AT&T is going to have a hard time hanging on to iPhone users after Verizon launches its own version of iPhone, which is rumored to be in the works for 2011. 

From my vantage point, Verizon will have the most robust 3G network in place at the time of a potential iPhone launch, and will have the clearest roadmap to a 4G iPhone with a significant network footprint behind it.  And for that reason, I can't wait to switch my iPhone to Verizon.

About El Dorado Ventures

El Dorado Ventures (EDV) is an entrepreneur-focused venture capital firm with over two decades of success. The firm invests in early-stage companies with disruptive technology and business models in emerging and high-growth markets.

The El Dorado Ventures team has a 25-year track record of successful early-stage technology investing, including early investments in Access Health, Algety Telecom, Compellent Technologies (NYSE: CML), Convio (NASDAQ: CNVO) Cyras Systems, EarthLink (NASDAQ: ELNK), Efficient Networks, Jigsaw, Novellus (NASDAQ: NVLS) and NuSpeed Internet Systems. EDV’s partners have helped dozens of portfolio companies go public, while many others have been acquired by major technology companies including AT&T, Cisco Systems, nVidia, SAP, Salesforce.com, Siemens, Texas Instruments and Yahoo. For more information, please visit www.eldorado.com.

Additional Newsletters

Fall 2010
Why I'm Switching My iPhone to Verizon

Spring 2010
Brands Get a Powerful New Listening Post on the Web

Fall 2009
Automobiles -An Industry Ripe for VC-Backed Disruption?

Spring 2009
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