Verizon CFO: subsidized prices to come down in the next few years


It’s no secret that when you think about Big Red you also think about lots of green. Verizon likes its money, but chief financial officer Fran Shammo has reason to believe that some of its price tags will eventually come down within the next few years. Specifically, Shammo touched on high subsidy prices when it comes to smartphone sales, and cited the growing LTE market and the blurred lines it’s creating as reasons why prices will soon be driven down.

The typical high-end smartphone on Verizon costs between $200 and $300 these days, but users can get perfectly fine LTE phones for $0 – $200 with decent hardware. With competition between operating systems and OEMs strengthening by the day we could be seeing lower MSRPs, and that is something that also directly affects the way a carriers subsidizes a smartphone.

Seeing how this trend affects the tablet space will be even more interesting, as some users still consider a $500 ticket price for a tablet on a two-year contract to be quite egregious. Shammo also said the launch of VoLTE within the next year will help drive subsidy prices down as more and more Verizon phones eventually ditch antiquated CDMA chips.

T-Mobile has shaken the subsidy model up the most in recent years with the advent of its value plans. On these plans, users can buy smartphones for a down payment (your cost after subsidy in typical pricing models) with payments for the rest of the phone spread out over the course of several months until the device is paid off.

Should you decide to end your arrangement with T-Mobile before then, the only cost to you is the remaining balance of the phone after those payments. Users going this route get a decent discount on service, too, and it seems to be a very valuable deal for those who take advantage of it.

It’s that sort of outside-the-box thinking that will force Verizon, Sprint, AT&T et al. to get creative in the near future and shape their business models to adapt to the changing wireless market. We won’t even consider factors outside their control like the general economy. It’s not at all ridiculous to think subsidies will get cheaper in the coming years, so the only question is “who first, and when?”

[via Fierce Wireless]

Quentyn Kennemer
The "Google Phone" sounded too awesome to pass up, so I bought a G1. The rest is history. And yes, I know my name isn't Wilson.

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  1. Verizon need to stop charging the highest prices for phones and service… They are losing customers every day because of their current structure.

    1. really? They just recieved the JD Power award for network quality and customer service, set a record 2.1M retail postpaid net connections in the 4th quarter giving them 92.5M total retail postpaid customers. Sounds like people are flocking, not running. Give me a fast, reliable network and customer service reps that actually know what they’re doing and I’ll pay a little more for my service gladly. Just my .02. Besides that, I don’t buy my phones subsidized. When I’m ready for a change, I sell my current one and buy the new one via Swappa or the like. Avoids contract renewals and loss of unlimited data (for now, i’m sure that’ll be ending soon enough).

      1. If you are on Verizon and buy your phone full charge, doesn’t that mean are giving up your subsidy benefit, but still paying for it?

        1. Well, to start, he mentioned he was keeping his unlimited data. That’s something. Also, depending on the rest of his plan, he may be paying less per month than newer plans. My wife just switched her plan and paid no attention to what they were giving her. She is now paying about $20 more per month for less data (but more minutes) than she was before.

        2. I believe you are correct, I’d never consider paying full MSRP via Verizon for a phone though. I can usually wait 30 days when a new phone comes out and get it for a more reasonable price on another site.

      2. A LITTLE more?!?

        I ran!

    2. This is one of the most comically incorrect things I’ve ever read in my life. Here’s a hint, get off the blogs full of comments from whiny, entitled crybabies and out in to the real world. Verizon has been the envy of the industry for years and that’s not going to change any time soon. I guarantee you the investors of other wireless competitors wish they all could match Verizon’s performance.

      1. Too true. The wife and I always talk about leaving Verizon but the service is so outstanding it’s hard to justify leaving even with the 20-30% price difference between a lower-tier T-Mobile or other cheap plan.

    3. that’s the same as T mobile in the uk. they don’t believe in unlimited internet, and they charge a lot of money for 4g. And they are loosing money. so they are increasing peoples contract price forcefully!!!

    4. How many are they losing (net) per day?

  2. How do you figure that what TMobile is doing is better then Verizon? TMobile artificially inflates the costs of phones while Verizon sees phone costs as dropping soon. I seriously doubt tmobile will drop phone costs after just dropping the cost of monthly service.

    1. Actually T-mobile charges the MSRP, with the exception of the nexus4. It’s the same price as you’d pay if you bought a full price phone from Verizon.
      Verizon is claiming they expect to see MSRP’s for phone drop, though I don’t see why they think that lol.

      1. Easy, phones only cost $200-$300 to manufacture on the high end, and phones like the nexus 4 with a $300 msrp only prove this. It’s high end and that cheap. There are new low end model phone coming out that sell used for under $100 only a month or two after being released. The only thing they lack is a flash on the back, for the camera. That’s it. They could easily add a flash for next to nothing in manufacturing costs. I imagine since low end phones are powerful enough now, we will likely start to see phones budget cheaper and cheaper. We could see 100-300 off contract prices in 2-4 years, even for most all high end phones. Assuming they develop the ability to sell direct to the consumer.

    2. While I don’t use tmobile any longer, what they are doing is quite nice. If you went out and bought a used device, you’d be paying less monthly on tmobile than you would if you bought a phone from them. Do the same on AT&T, sprint, verizon, etc. and you will pay the same amount regardless of whether you are subsidizing a phone through them or not.

  3. Verizon may charge a lot, but compared to the competition they have a great network, great customer service and they provide you with benefits that are worth the price

  4. I think Verizon will do the opposite of T-mobile. They’ll have the highest monthly prices but cheap subsidized phones… the $100 savings will more than be made up by the $10-15/mo higher price.

    1. Get everyone into tiered data and watch that revenue grow with the high costs instead of charging people $200 upfront as a one time thing.

      1. Another great point. Losing unlimited data is the reason I’m only buying ebay phones from now on.

  5. In going to be honest, I never understood the “compared to the competition their network and customer service is better” baloney. My wife and I travel around the US a good bit, and have both AT&T and Verizon. Services are about on par. Data speeds are about on par. Customer service is about on par. Anecdotal, I know, but I’m guessing a lot more people base their opinion on far less information than that…

  6. I will stick with Tmobile and unlimited data and cheaper rates. The coverage in Dfw is just fine and their customer service has been fine for the 9 years I’ve been a customer.

  7. This is just a ploy to get the remaining unlimited data holders to give up their grandfather plans.

  8. More VoLTE, but no unlimited data. Go figure.

  9. Verizon may have solid service but none of their plans makes sense for me and it literally would only hurt me to have Verizon as a carrier. Within the last 30 days I’ve used 11.5 GB of 4G data… give me totally unlimited data Verizon, and then we can talk.

  10. So 3 yr contracts then lol

  11. THANK YOU VERIZON!!! WAAAAH whiners come troll a vibrant LTE network with great phones and ok service. WAAAH Trollolololols!! ahahah waaaaah.

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