LTE Supporting Only 5 Percent of Verizon Wireless Subscribers
Confusion and Skepticism May Impede 4G Adoption
With so many potential 4G customers expressing concerns about cost and performance providers may be in for some disappointment.
What if they built a network and nobody (or one out of 20 people) came?
The Wall Street Journal made an interesting find in the response to a question posed by Deutsche Bank analyst Brett Feldman to Fran Shammo, Verizon’s executive vice president and chief financial officer, at Deutsche Bank Media and Telecommunications Conference. The response is from a transcript from Thomson Reuters StreetEvents:
Yes. Well, the 4G network has a ton of capacity. Obviously, we only have 5% of our customers on it right now. So it’s a promotion to get people to move over to that 4G network. Like you said, Brett, it is very critical for us and we’re playing a very delicate balancing act here that I don’t want to spend any more money on my 3G network.
So we built the 3G network out to handle the iPhone launch, which we did very successfully, but now we really do want to keep that investment to a very, very minimum. Because based on my projections for every dollar I invest in that now, I will never get that dollar in return. So it’s very important for us to move over.
And as far as maintaining these promotional periods, this promotion is only running for I think two months and then we’ll come off of that promotion. There will be more 4G LTE phones out there, so you’re going to see us — we will do promotions here and there, but it’s more critical for us from a cost benefit perspective, spectrum utilization perspective, to move more people to 4G from 3G.
As the third paragraph makes clear, the question that Shammo was answering related to the length of time the company would offer special promotions to get people to switch from 3G to 4G LTE. His stated desire to end those promotions begs the bigger question: Why only 5 percent in a time of heavy promotion and artificially low prices?
It’s too early — far too early — to draw conclusions. The network only has been operational for about a year, and other carriers aren’t changing the plans that previously were made. Gotta Be Mobile calls Verizon’s carriage level “incredibly small,” but thinks Verizon it will do well in the long run:
Combine affordable new phones and cheaper prices on the older 4G LTE phones with the lack of new 3G smartphones and the possibility for a 4G LTE iPhone 5 this fall and Verizon is in a good position.
It is possible to see potential problems down the road. Suppose the carriers, in an era in which it was impossible to go to a news website without hearing about the explosion of iPads, iPhones, Android devices, oversold themselves on the need for 4G? There is an axiom among carriers that customers always fill out the spectrum that is available to them. Cliches are great — and often hold a grain of truth — but they don’t replace solid market intelligence. It just may be that enough people are satisfied with 3G that the basic assumptions underlying the move to LTE aren’t as solid as it is thought.
In any case, it’s overreacting to think that LTE won’t succeed, especially when voice is added to the mix. That said, it isn’t too early to think that Verizon’s results may be a canary in the coal mine.