If you were hoping for some radical changes to Verizon’s business model in the near future, you’re probably out of luck. In the same conference call that we covered yesterday, Verizon CFO Fran Shammo not only explained how his company can get away with charging more for its services, but why those services have remained fundamentally unchanged in a rapidly evolving market.
“We believe that the subsidy model is an extremely good model,” says Shammo. “It has done wonders for us in this industry. So I think to abandon that […] is a mistake.”
Shammo acknowledges that there are customers who would prefer installment plans to standard two-year subsidies, but he believes the programs in place do enough to meet that demand without detracting from the primary plans. Verizon has been consistently tweaking its Edge program over the past year, accelerating upgrade eligibility for customers who demand it, but Shammo remains unconvinced that an installment plan will attract a significant portion of the consumer base or even contribute to Verizon’s revenue in any meaningful way.
“[…]when I speak about service revenue growth, obviously that does not include Edge because Edge’s installment sale, that is going to go equipment, that will go to total revenue. I am focused in on service revenue growth because that is really the bread-and-butter of the industry. And that is the bread-and-butter of Verizon Wireless.”
Verizon is still the most reliable carrier on the market, and it’s hard to argue with success, but the more the company resists change, the more its loudest critics will complain.
