Speaking at a recent Deutsche Bank’s Media, Internet, and Telecom conference Verizon's CFO Fran Shammo revealed that the company is looking to remove the CDMA chips from phones, in a bid to reduce subsidies.
When asked a question about where subsidies are headed, the Chief Financial Officer answered that subsidies will start to decrease, over the next two to three years, just because of the increasing competition from Windows Phone and Blackberry. However internally the company also wants to see subsidies reduced and has plans to switch to pure LTE handsets.
Verizon is investing heavily in LTE technology and has plans to get voice over LTE (VoLTE) running by the end of this year, maybe the beginning of next year. Then once this has been deployed the company says that by late 2014 it will be possible to take the CDMA chip out of the smartphones and just have a pure LTE handset. This will in turn start to reduce subsidies.
Backwards compatibility is a cost issue for today's modern phones, along with chip sets for Wi-Fi, Bluetooth and NFC, the phones need chips for GSM, 3G and now 4G LTE. Removing support for the older networks (CDMA in Verizon's case) will reduce the cost of the phone. Of course for that to work, the LTE networks need to be mature in terms of coverage and reliability.
At the moment Verizon's LTE network is available in 480 cities, which the company says gives 87% of America's population access to 4G. Its 3G network is in a better shape, but outside of the cities the 4G coverage is low. The last thing you want is to go out for a family outing and find you have no network signal!
The other question is will companies like Verizon pass on the savings in subsidies to the consumers or is it just a business move to increase profits?
What do you think? Would you buy a 4G only smartphone for use with a company like Verizon (assuming it improves its coverage to at least what its 3G coverage is today). Let me know by leaving a comment below.