Why Verizon just launched a $99 LTE phone

Verizon(s vz) introduced a new Android(s goog) smartphone on Monday. The Pantech Breakout runs on Verizon’s fast 4G network but will only cost $99 after rebate when it appears in stores on Thursday. The low purchase price requires a two-year contract with a minimum 2 GB data plan and is far less than the initial price of Verizon’s other LTE phones, which have typically cost $249 or more at launch. Pantech’s Breakout is more of a mid-tier handset when compared to prior LTE phones, but phones like this will help push consumers on Verizon’s new network.

The Breakout uses a 1 GHz single-core processor to drive Android 2.3, can record 720p high-definition video, and provides a 4-inch touchscreen with 800×480 resolution. Bluetooth 3.0, 802.11 b/g/n Wi-Fi and GPS round out the wireless connections and the phone can share its LTE connection with up to 10 devices using Wi-Fi. A front-facing camera supports video chat and the handset comes preloaded with Swype’s software keyboard for fast text entry. And of course, the phone has access to the many software applications found in the Android Market.

At $99, the Pantech Breakout is roughly half the cost (or less) than Verizon’s higher-end LTE handsets such as the HTC Thunderbolt or Samsung Droid Charge. Regardless, it won’t likely appeal to power users who are more than willing to spend upwards of $200 or more for the latest and greatest smartphone.

On paper, however, the Breakout offers more than half of the functionality of the more costly smartphones and I wouldn’t be surprised to see Verizon steer many customers towards this relatively inexpensive phone.

The Breakout represents the beginning of Verizon’s effort to push its 4G LTE service down into the mid-tier smartphone range and similar low-priced LTE phones are likely to follow. The first half of 2011 represented the launch of Verizon’s new mobile broadband network. Now that the network is proven, consumers are becoming familiar with the term “LTE,” and Verizon is on pace to cover 185 million people with 4G service by year-end, the carrier has to make LTE hardware more affordable and appealing.

With $99 4G handsets, Verizon can expand its LTE user base, and by getting more consumers initially addicted to the faster broadband speeds — making them more likely to buy additional monthly bandwidth — it can start recouping the 4G network investment faster. By pushing LTE down into devices for mainstream customers, Verizon is trying to beat AT&T(s t) to the punch, as its biggest rival just launched its own LTE network in five markets this past Sunday. In as little in six to nine months, I wouldn’t be shocked to see most of Verizon’s new phone lineup offering LTE, even in the low-end range of handsets to a degree.