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According to CFO Fran Shammo, Verizon will have LTE-only phones in the market by late 2014 and expects device subsidies to decrease in the next few years. Speaking at the Deutsche Bank 2013 Media, Internet & Telecom Conference, Shammo explained that the move to LTE-only devices in late 2014 will help reduce the cost of smart phones. Presumably if a device doesn't require a CDMA chipset at all the manufacturers will be able to cut costs, but we have to wonder by how much the price could change just by leaving the CDMA chipset out. Further expanding on reducing the cost of smart phones, Shammo said that he expects device subsidies to fall over the next two to three years due to competition between manufacturers.

Presumably lower upfront costs for devices mean smaller subsidies for the carrier to take the burden of, but we doubt those savings will be passed on to consumers. Subsidizing handsets is an expensive proposition for carriers, and any savings they find will be internalized while on-contract prices for consumers will likely stay the same. The rigid pricing model for on-contract phones in the U.S. makes it hard for savings to make it to the end user.

Source: FierceWireless

 

Reader comments

Verizon exec expects LTE-only phones in 2014, subsidies to decrease over time

25 Comments

Wait and see how carriers are going to screw over consumers once they go VoIP, they will be virtually unregulated due to the Communications Act of 1996. Once they are able to assign IP's to numbers they can gouge the hell out of prices with impunity and basically dictate to you how to use your phone and also censor your usage as well. Carriers Don't want you on a contract anymore, that way they can change your rates every year or every month.

http://www.wired.com/opinion/2013/02/the-latest-sneaky-plan-to-rob-ameri...

They are in to make money for their shareholders, not to make us happy. Or only happy enough that we don't leave. With all the mergers, there is limited choice in the US. Which sucks. I hope the FCC changes the IP rules. Also, "regular" phones lines have a mandate to be able to reach 911, as far as I know VOIP doesn't it... which is why you get warning with whatever service you get.

LTE falls back to GSM when there are no LTE towers around. Verizon is switching to GSM as part of their LTE conversion.

That is entirely, 100% incorrect. Literally that is the opposite of what this article states.

1) When there is no LTE coverage, Verizon utilizes a CDMA network (not GSM).

2) Where could you possibly have picked up that Verizon is changing from CDMA to GSM? That's nowhere in the article and makes zero sense whatsoever; Verizon is not adopting GSM technology.

3) Voice calls will be handled OVER the LTE network, as in Verizon's cellular CDMA network will be gone and Verizon will ONLY offer an LTE network that will handle BOTH voice and data (VoLTE).

Let's read next time...

It's the "Verizon uses sim cards for LTE, so they are going full on GSM" crowd of ignorance that has spread that misinformation.

Well since their entire footprint is planned on being covered with LTE, so CDMA won't be needed as a fallback anymore.

LTE does not fall back to GSM, any better than it falls back to CDMA. Verizon is not switching to GSM. They are going VoLTE later this year.

The savings will be passed on to consumers in as much as competition drives it. Think of it this way. If costs go down and Verizon doesn't reduce prices, at&t will to get a leg up on Verizon. Then Verizon will be forced to reduce prices. If they all agree not to reduce prices its collusion which is illegal. Seriously, this stuff is economics 101 and it shocks me how many people don't/refuse to get it. This should be taught in high school.

You're making a horrible assumption that people will notice that Verizon and AT&T are paying less in subsidies and will demand lower on-contract prices. You're also forgetting that when people are locked into a 2-year contract system, the market can't adjust quickly, if at all. Because the subsidized device + 2-year contract is the standard, prices don't fluctuate to indicate when something is over or under priced, nor do they reflect changes in the cost of supply. The price has been set independent of demand, and for that reason changes in the cost of subsidizing phones to carriers will not in any way directly effect the pricing of phones on-contract.

Its also a fallacy to think that AT&T and Verizon are actually honestly competing on handset prices at this point. I would nearly go as far as to say that it is collusion and is illegal, except for the fact that its a creation of the 2-year contract system rather than two companies colluding directly. They have both set up a market in which they don't have to technically collude, but still receive the benefit of a duopoly system.

Sure, if AT&T for some reason took the savings it was making on lower subsidy costs and passed it onto the consumer in the form of lower upfront handset prices, Verizon would at some point have to follow suit. The one problem with the situation is that AT&T has no incentive whatsoever to do that. There is no downside to them continuing to ask the same on-contract price for phones while their own costs go down, because customers on average aren't demanding those lower prices. If they were, the system wouldn't be as it is today.

Don't get me wrong, I agree that the current structure is interfering with open competition. I hate the status quo and am really hoping tmobile's stance takes off, but to say there is no competition at all is a real fallacy. Also, handset prices aren't the only point of competition in this market, because of subsidies its really plan rates. Finally, it has nothing to do with customers "noticing costs went down". It has to do with interaction between carriers. If at&t thinks it can make more by reducing prices (of plans) to take customers, it will. otherwise, we wouldn't have prepaid networks.

I'm sorry if I've been combative, that isn't my intent. I just mean to say that taking extremes like costs reductions won't be passed on or carriers aren't competing on price is incorrect. It is all a mater of the level to which competition is happening. You are right IMHO that the current structure hinders it though.

There are still huge gaps in the LTE coverage. If I'm going to deal with spotty coverage I'll just go to another provider and save a ton of money.

Considering Verizon intends to cover its entire 3G footprint with LTE in the coming months, I'd venture to say you don't have much to worry about. For the carrier that prides itself (and its commercials) on an insanely huge voice network footprint, I don't think Verizon would ever launch an LTE-only device if it wasn't sure that the customers would receive the same amount of voice coverage as it would with a CDMA radio on board. The end of 2014 is a long, long ways away.

Verizon currently only has about half of their 3G network covered with LTE and it's taken them over 2 years to do it. I don't see how they're going to cover the other half in a few months.

Also, there are a few places in my area where I do drop to 3G that should have LTE coverage. If Verizon doesn't fix all of those areas, I can't switch to an LTE-only phone.

skyboxer: Since you've been under a rock, I'll enlighten you. Their entire 3G network will be covered with LTE by June 2013. I think you'll be OK with an LTE only phone a year after that. Stop being a drama queen.

Tell that to people living in Sedro-Woolley, WA.

Seriously, not everyone lives in areas that are scheduled for expanded coverage

Verizon certainly has at least started a rollout of 4G LTE in Sedro-Wooley. And again, you have to remember that we're talking about late 2014 rollout of LTE-only devices. It's the start of 2013 right now -- if the LTE rollout was complete, they'd be launching the LTE-only devices right now, not 18 months from now.

I dont know. Right now VZW is killing on the wireless data side but voLTE is bound to affect that seriously. The FCC will never approve it unless its as reliable as CDMA is now for voice. This means that voLTE traffic will have to take priority on their network. Once this happens so much for that great wireless data speed yall have now. Its true LTE as a technology is in its infancy but the implementation and data mitigation that voLTE will require is bound to have a negative affect for their customers in the short term

Am I the only one reading this correctly? "Device subsidies to decrease..." Does that mean the amount they subsidize would decrease and that the consumer would have to pay more?

The phone's cost from the manufacturer would be cheaper for VZW -- therefore, the amount they are subsidizing to you with on-contract pricing would be lower (for them).

I understood it that the price of phones will decrease and so the cost to subsidize them will fall, however, the price for customers will remain the same. Off contract price of a top phone is now $500 instead of $600, subsidized price is $200 to consumer. VZW saves $100 in subsidizing the phone but consumers will likely not see the savings and continue to pay $200.

So, I am on unlimited and need to pay full price for a phone anyway. If everyone has to pay full price, they certainly will screw me and force me from my unlimited. Once they do, goodbye VZW. They are NEVER in the business of helping consumers, they are in the business for profit, and they seem to do a darn good job convincing a majority of their customers they are the best. When they fired the technician union, and Im stuck dealing with salesmen for tech support, I started giving them the middle finger.