Is Verizon going broke? Do they have so much cash they don't know what to do with it? With the new Share Everything plans, there is a lot of grumbling about the apparent increase in cost for comparable family plans. Nobody wants to pay more, and in the search for answers I have seen a lot of comments that Verizon is fattening their pockets, or more curiously, looking to pay for their LTE network.
Verizon claims 88 million customers that are due for an upgrade every 20 months. So every 20 months a customer gets an upgrade, which means 88 million upgrades in 20 months, or 44 million upgrades in 10 months, or 53 million upgrades in a year. But not everybody upgrades right away, so let's (conservatively) say it's 30 million upgrades a year. 30 million upgrades a year at $30 each is an extra $900 million in Verizon's pocket out of thin air.
Six months ago Deutsche Telekom's CEO said it would cost $9 billion for T-Mobile to roll out LTE. Let's say Verizon has incurred similar costs from start to current of their LTE rollout. This mean's that one year's worth of upgrade fees will cover 10% of the total LTE cost, or that it will take 10 years of upgrade fees to cover the cost. Given that this project was started from initial capital investment (likely Verizon's own), they may only need to recover half, or even less of the $9 billion! Verizon could cover the remaining costs of its LTE completion with 2-5 years of upgrade fees, and that is assuming they will cover the rest of the LTE costs solely with upgrade fees. I understand companies' goals are to increase revenues, but hasn't the upgrade fee been enough in this regard?
Take a look here at Verizon's Q1 2012 highlights: Verizon had a 7.7% year-over-year increase in wireless service revenues. Certainly they are not struggling, but at some point they need to find a balance between revenue growth and catering to customers' wishes. While the new Share Everything plans will be optional, I have no doubt that in 12 to 24 months Verizon will overhaul their offerings and no longer support current tiered plans. Verizon seems to have a worthwhile purpose for the upgrade fees--let's wait and see what they do with any increase in revenue from these new plans.
-jj
They need money to pay those ridiculous bonuses for the ceo's too. Think I'm going to send them my resume cause they obviously take people with a few screws loose.
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