Fran Shammo, Verizon’s chief financial officer, said that the launch of its 4G services on new devices—starting with the HTC Thunderbolt—will usher in a new “tiered pricing structure.”
Shammo, speaking at the Morgan Stanley Technology, Media and Telecommunications conference, said the following:
- The iPhone launch “has gone flawlessly” with more than 60 percent of sales taking place online.
- “As we progress down the LTE range and bring more devices to the table—we will be launching the HTC Thunderbolt very shortly here—that will give you a flavor of what our tiered pricing structure will look like going forward.”
- “LTE also gives us the capability to price very differently than we priced before. Not just on consumption, but also possibly on speed differentiation. So we are still working through those models. Don’t know if we will do something there yet, but wireless is still working through those and that will come out with the HTC launch.”
Shammo spent a lot of time talking about LTE pricing. Today, Verizon Wireless (NYSE:VZ) offers a 5GB a month plan for $50 and 10GB for $80. LTE will drive average revenue per unit (ARPU) accretion, said Shammo.He also addressed the iPhone’s $30 unlimited plan, which will be reexamined. After all, Verizon didn’t want to put up any barriers to iPhone switchers from AT&T. However, Shammo noted the following.
I think everybody would know that that is not a long-term strategy. That we are going to move to a tiered price [level]. So we will probably do that probably in the mid-summer timeframe, somewhere in that perspective.
But if you take it one step further, and you think about what consumers can afford that smartphone, what consumers can afford that higher end data plan, it is interesting.
Because, as I said at the Investor Day, the way I look at it is we have a very big opportunity at Verizon Wireless because 67% of our customers are either feature phone or multimedia phone. Which feature phones pay nothing in data unless you use it and then multimedia was only a $10 plan.
What we have seen since we launched the iPhone is we are seeing a fairly significant number of feature phone customers migrate to the smartphone. So there in itself, we see that –. We see the potential of our customer base is spending that $30 to $50 range which is then why we go to, I think tiered pricing will be important down the road.
Because as you mentioned, as smartphone prices come down with the competition that is coming from China and Huawei and some of the other manufacturers, it is going to push that smartphone price down, which means more and more people will be able to afford it. And we have got to give them an entry point that is sufficient for them to come in.
So we are still wrestling what that entry point is, to be honest. If you go back to December, we did trial a $15, 150 Mb plan. We saw that that stimulated a lot of activity at the lower end.
Bottom line: Verizon will entice you to LTE with low priced plans—and then bet you’ll blow by your caps.