MetroPCS: A 2G to 4G LTE leapfrog makes it a threat to wireless giants

Prepaid wireless player Metro PCS recently became the first wireless carrier with 4G Long-Term Evolution (LTE) coverage and the move can transform the company. Why? MetroPCS is going for a leapfrog from 2G to 4G services.

• LTE is launched in Las Vegas and Dallas.
• An Android phone will land next year to complement its Samsung Craft (right).
• Existing customers appear to be upgrading to LTE.
• The majority of MetroPCS markets will be covered by the end of 2010, but some may bleed over to 2011.
• There is a spike in data usage on LTE, but it's too early to quantify the effect.
• Markets like San Francisco, Philadelphia and New York will be covered.
• Keys said that there will be more devices on tap.
• MetroPCS prefers throttling over capping.

What's notable here is that MetroPCS is moving from 2G to 4G and giving itself a new data subscriber model as voice plans go to free. And with that jump, the company could be a threat to incumbent wireless carriers and their two-year contracts. As Keys said: "When you work in a no-contract environment, you can get voted off the island 12 times a year."

Now MetroPCS isn't talking at all about download speeds, but if it pulls off the 4G jump the company could be dangerous to rivals. Prepaid 4G services could speak to the masses. MetroPCS is touting the Craft as the most affordable 4G phone. That's a powerful message.

MetroPCS is offering talk, text and 4G for either $55 or $60 a month (statement). The Craft is available in the Dallas area for $299 plus tax after a $50 rebate. That's a bit pricey, but remember there's no contract. A $100 premium to avoid a contract isn't too onerous.

MetroPCS CEO Roger Lindquist talked a bit about the grand plan for LTE. In a nutshell, MetroPCS plans to use voice over IP (VoiP) to carry voice traffic and phase out CDMA. Speaking at a Goldman Sachs investor conference last month Lindquist had the following comments:

We're focused on managing spectrum, and that's why we went to LTE. We bypassed 3G -- too little, too late, only broadband. Now we're getting into the full transformation for both broadband and voice so that I think what we're going to see is the fact that we have a real opportunity to, shall we say, manage for the future with just the LTE transformation.

And.

LTE, which we see as a very major transformation for us, because unlike the 3G broadband, which was really an incremental to the voice network, which was the 3G voice for us, it did not make a lot of sense to invest heavily in that, and it also used up scarce resources like our spectrum. So we waited and decided last year that we could actually achieve our objectives, achieve our cost requirements in the -- both CapEx and looking forward into the OpEx world, which we can talk about later, so that it made sense for us to be a first mover.

And it was important because we have overlaid this on our existing network, we're using our existing towers, we're using our existing antennas. The only thing we're changing is that we're adding an eNodeB on each of our cell sites, so that gives us an opportunity we think going forward for not just data, broadband data, but we were very keen to evolve and develop VoIP and VoLTE sometime, 2011.

The overall plan is to put MetroPCS' network on par with larger rivals---except offer prepaid plans. Lindquist said that MetroPCS is looking to add more devices consumers want.

He added:

2010 I think is the year of the handsets. And what we have seen I think is a upgrading to QWERTY and smartphones. We've seen about nearly half our base in the recent goings over the last I would say couple of quarters focus on upgrading to a QWERTY or smartphone as we define it, and about 15% to 20% of our customers opting for the smartphone as opposed to just the QWERTY.

So we've seen that trend that people want to upgrade I think their phone. I think that the story this year is that the cumulative advertising and communication, from iPhones and Droid to BlackBerry, has so invigorated the mind of the consumer that they want a better experience. And so to me it is very much about the handsets.

From there, Lindquist will focus on affordability and then hit network parity. Even if the devices are a bit more expensive, MetroPCS says consumers will still buy hot devices. Lindquist said it will have device and network parity sometime in the second half of 2011.

At that point it's a joust between prepaid and postpaid models. MetroPCS could be dangerous.