Any thoughts that Verizon Wireless would be forced to go back to offering unlimited data plans to mobile customers in the face of similar offerings from smaller rivals took a hit this week as the company claimed such offerings will eventually hobble a network.
Speaking at the Goldman Sachs 22nd Annual Communacopia Conference this week, Verizon Communications CEO Lowell McAdam explained that carriers offering unlimited data services will eventually run out of capacity on their networks, impacting overall network quality. This would seem to bolster Verizon Wireless’ 2011 move in cutting out unlimited data plans in favor of tiered options. That decision followed one by AT&T Mobility, which cut unlimited data access for smartphones.
“With unlimited, it’s the physics that breaks it,” McAdam explained. “If you allow unlimited usage, you just run out of gas.”
Sprint and T-Mobile US continue to offer flat-rate, unlimited data for smartphone customers, offerings that the smaller rivals are using extensively in their marketing efforts. Both operators have been questioned extensively on the ability to continue offering that option, with both saying they were confident in being able to support the traffic at least for the near term. Sprint one-upped that guarantee in July by rolling out new rate plans that ensure customers will continue having access to unlimited voice calling, messaging and data services for the life of a line of service.
Analysts have noted that the move was necessary for Sprint, which has struggled to add customers this year and is set to continue struggling through at least the end of 2013. Sprint’s recent acquisition of Clearwire should help the carrier support its unlimited data pledge thanks to a robust spectrum portfolio in the 2.5 GHz band that Sprint has said it plans to begin rolling out across markets beginning next year.
By comparison, T-Mobile US is on a bit of a tear, having out-gained its larger rivals in customer additions during the second quarter, bolstered by its very aggressive “un-carrier” marketing initiatives.
McAdam also managed to throw out the “5G” term, claiming that plans to bolster current networks to handle the increased demand for video services would likely come from the evolution of the current LTE-based “4G” standard. McAdam noted earlier this year at the Consumer Electronics Show that that the carrier was looking into possibly setting aside a channel on its LTE network dedicated to video streaming. That offering would take advantage of multimedia broadcast multicast service standard recently approved by the 3GPP, with Verizon Wireless currently dubbing the service LTE Broadcast. The carrier said it was working with Qualcomm’s Labs division on a solution, which would make sense as Qualcomm was a pioneer in dedicated broadcast steaming services with its now shuttered MediaFLO offering.
U.S. focus
McAdam also noted that Verizon’s recent deal to acquire Vodafone’s 45% stake in Verizon Wireless shows the telecom operator’s confidence in the domestic market to continue supporting company growth. The $130 billion deal is expected to close early next year, resulting in all of Verizon Wireless’ ample financial return pouring into Verizon’s coffers.
Rival AT&T has reportedly been looking at expanding its presence outside of the United States, with rumors suggesting a potential acquisition of wireline assets in Europe or India.
McAdam also echoed comments made by AT&T CEO Randal Stephenson regarding the current regulatory environment’s support for at least four nationwide wireless operators, noting he did not expect to see any substantial deals among the nation’s larger operators during the near term. While AT&T has itself been very aggressive in gobbling up smaller operators, Verizon Wireless has focused on deals involving spectrum assets.
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