Will 4G Wireless Really Threaten Wires?

[qi:gigaom_icon_4G] Later this year in Boston and Seattle, Verizon (s VZ) will test a wireless technology capable of delivering speeds that are comparable to those of basic cable modems and exceeding basic DSL. And the local Boston papers want to know if this means consumers should dump their wirelines and welcome the fourth-generation wireless technology as a viable home broadband connection. Will 4G wireless services, be they from cellular carriers deploying LTE or from Clearwire (s CLWR) deploying WiMAX, replace basic cable and DSL broadband, much like wireless service is replacing landlines?

That’s what I wondered last year, when I was shown speeds of 150 Mbps down and 30 Mbps upstream during tests of Long Term Evolution networks at Ericsson’s Dallas lab. In the real world, speeds will more likely resemble 10-20 Mbps down and 5 Mbps up, but that’s still much faster than my current cable service from Time Warner Cable (s twc), which is about 7 Mbps down and 512 kbps upstream. But for most people, this substitution theory won’t work when it comes to wired broadband. Here’s why:

Wireless networks are constrained: Data use takes up more capacity on a network than voice. Ericsson has estimated that data cards comprise 73 percent of traffic on a wireless network, even though they account for just 3 percent of the subscriptions. And if someone substitutes wireless for wired broadband, they’ll behave more like a data card user. Also most cellular networks (although not all) are designed for people on the move, not just those staying stationary and thus using just one tower. Perhaps carriers will change that with their 4G network designs. Clearwire’s WiMAX network does make concessions to fact that some of its customer base will stay put, but it still only has so much spectrum to use. This issue of constraint brings us to the next few reasons wireless isn’t a great substitute for wireline.

Data caps: As part of their efforts to manage their networks, cellular carriers currently have limits on their data consumption, typically around 5 GB per month. That’s fine for occasional use, but may cause problems for folks trying to download movies and music. That cap may increase on LTE networks, but I wouldn’t hold my breath expecting that it will compare with the data one can download on a wired network. Clearwire’s WiMAX service offers an unlimited plan as well as capped plans.

Limiting terms of service: There’s a reason AT&T is so afraid of Slingbox on the iPhone, and it’s not about competition. It’s because high-bandwidth services use up limited resources on the network, threatening to prevent calls or other services from going through. Next-generation service will be better, but they can’t eliminate this problem completely, so all those watching HD video on the web should keep their wires. Even Clearwire has to come up with a way to manage bandwidth when networks get clogged.

Cost: I pay $60 a month for my current 3G mobile broadband service, which is about $20 more than I pay for my cable service (although this could change under various tiered pricing plans). Clearwire charges $45 for unlimited home usage without mobile access. If you don’t need the convenience offered by mobile broadband (and not everyone does), then it doesn’t make sense to pay more when you’re really getting less.

Speeds: I may be too optimistic, but by the time most people get access to wireless broadband, their wired broadband speeds should be faster. Both the telcos and cable companies are rapidly deploying technology to boost speeds on both the downstream and the upstream side, with the exception of a few laggards. Since WiMAX is still getting rolled out and LTE won’t be prevalent until 2012, much of the U.S. will have faster speeds for less money.

Except for those that don’t, and they make up the exception to the wired broadband rule. Those that live in tiny pockets of cities without wired connectivity, but who have access to 4G wireless service, should cut their cord and hope for the best.

This article also appeared on BusinessWeek.com.