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Verizon Won’t Be Baited Into Aggressive Price Wars

November 5, 2014 - Written By David Steele

T-Mobile USA and Sprint have between them started a price war amongst the US carriers and this is good news for the customer, at least in the short term. The carriers are keen to keep customers paying at least what they’re currently paying and so have been offering better deals, typically more data. The bigger carriers of AT&T and Verizon have not offered such great deals; instead, their movement has been more limited. We are seeing movement though, but AT&T and Verizon have less need to entice customers to their networks. Despite their higher prices, both carriers have been adding customers and at a considerably higher margin than the smaller carriers: Verizon’s current profit margin is over 40% compared with under 10% for T-Mobile USA!

Although T-Mobile claim that this high profit margin is a sign that Verizon’s prices are too high, and many customers might agree, many are content with Verizon. The business is confident that the current wireless strategy will continue to work for the business. One of the key messages from Verizon is that they will not overreact to aggressive price cuts from rival carriers. These are brave words: T-Mobile USA is showing strong subscriber growth and aggressive un-carrier marketing and Sprint are on something of a charm offensive with high value shared data plans and individual unlimited data plans. Arguably, Verizon has more to lose than the competition. Verizon’s plan is to offer discounts to what it rather quaintly calls, “at risk customers,” and take “surgical plan changes.” In Verizon’s management-speak, they believe that they are taking a disciplined approach; in other words, they’re not rushing into the market to offer the same discounts and deals as T-Mobile USA and Sprint. Where Verizon have offered deals, they’ve intelligently planned them. For example, new and existing customers who pick an $80 or higher More Everything shared data plan benefit from 10 GB of data (up from 6 GB), at $100 that’s 15 GB (up from 10 GB). Customers switching in for a new LTE smartphone with either a two year plan or Verizon Edge will receive a $150 port-in credit – all designed to arrive in front of the Black Monday traditional industry promotions.

Looking forwards, Verizon’s next project must surely be acquiring and deploying AWS-3 spectrum. The idea here is that Verizon are working hard to ensure their network performs well during peak times and management believe that network quality will be critical. This, then, is the justification for not being baited into aggressive price cuts. Verizon will charge more because their service is consistently better. And having considered it, it’s something that’s close to my heart: I don’t mind a slow network, I prefer a fast network but I’d rather my network be consistent. This is what I do with my smartphone but with my tablet I’m less concerned and so use a different provider, one where it’ll sometimes run quicker but sometimes drop signal altogether. But what do our readers think? Do you value speed, even if coverage is spotty, or will you put a premium on a more consistent service?