Operating System Competition, LTE Adoption Should Lead to Lower Subsidies, Verizon’s Shammo Says
More operating system and device competition should mean lower smartphone subsidies across the industry over the next two to three years, said Verizon Chief Financial Officer Fran Shammo Monday at a Deutsche Bank investor conference. The move of two new major operating system entrants into the market -- Windows Phone and BlackBerry 10 -- is a good thing because “the more operating systems you have in the ecosystem, inherently the more competitive that system becomes,” he said. “I am a true believer that as these operating systems start to really take hold … then you are going to start to see more competition which leads to lower prices. So I think it is going to follow the same way that I watched the basic phones come over time. I think smartphones will do the same thing."
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Verizon Wireless, which Verizon co-owns with Vodafone, also hopes to reduce subsidies by focusing on getting voice over LTE technology by the end of this year or the beginning of 2014, Shammo said. “Then if you look out into late 2014 then you start to think of things like ‘OK, so now I can start to take the CDMA chip out of the phone and just have a pure LTE handset,'” he said. “That also starts to reduce subsidies.” The U.S. wireless industry has followed the subsidy model for the last 12 years -- and Shammo said it is just one of many costs Verizon must monitor. But “it is a big line and we have to manage that line,” he said.
Verizon Wireless’s Share Everything shared-data plans are “working the way we thought,” though “maybe in different devices” than the carrier had anticipated, Shammo said. Verizon Wireless’s sales of mobile-connected tablets have been lower than expected, with 70 percent of the tablets it has sold only connecting through Wi-Fi, he said. “When we launched our Share Everything plan we really thought that the uptick of tablet attachment would increase,” Shammo said. “What has happened is the tablet attachment hasn’t increased as much as we anticipated. I mean we are getting some of that, but really what we are getting is we are getting additional net adds on MiFi devices.” It costs $10 to add a tablet to a Share Everything plan.