Verizon CEO Lowell McAdam said that the carrier’s 4G Long-Term Evolution smartphones that go for $299 “are selling very well,” but noted that the company’s speedy network is still largely uninhabited.
McAdam, speaking at a UBS communications conference, touched on multiple points, but the relationship between $299 LTE devices and network capacity was worth noting.
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During his talk, McAdam, who gushed about the Motorola Droid RAZR said:
There has been a lot of questions, for example, about the iPhone sells at $199 and we are selling some of the new 4G stuff at $299 and they are selling very well. If you have got the device and you got the service that the customers want, especially with our base because we are such a heavily postpaid, higher credit score customer, they are going to buy it. So to me the issue is are we going to have the applications that justify it.
It’s in Verizon Wireless’ best interest to get folks on the 4G network because they will gobble up more data. LTE devices that cost the same as 3G smartphones would be an easy way to juice network usage. McAdam added:
We are selling a lot of 3G devices. The 4G devices now, I believe, are very competitive and, because of some of the 4G capabilities, will even be superior. I think we want to accelerate that move over.
So while we are holding the subsidy down on those and charging $299 for the device, we want to stimulate the usage on the 4G network which is relatively empty at this point. So we aren’t seeing at this point a ton more usage on 4G; a little bit more, especially when you get into the tablets and you start doing some video. But as we layer on these applications we want to almost pre-seed the base so that when these integrated applications come out we are not starting from scratch with devices. We have already got 4 or 5, 10 million devices out there. So I think it’s a way for us to get up the hockey stick very quickly.
My hunch is that Verizon Wireless would get to that 4G hockey stick growth curve faster with better subsidies on its LTE phones. If I’m going to be locked into a two-year contract $199 for a smartphone is my max.
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