Verizon continues to grow, despite complaints from some customers
Verizon has shown strong earnings in its first-quarter report, but it is also facing criticism from a growing number of customers who want their contracts eliminated.
The company, which released its first-quarter report today, shows total operating revenues of $29.4 billion, a 4.2 percent increase from last year.
The report shows an increase of FiOS revenues as well, with 15.1 percent growth for FiOS video and FiOS Internet.
Verizon is also faring well with smart phones. CNET reports that Verizon sold 7.2 million smart phones, 28 percent of which went to new Verizon customers. About 4 million of the smart phones sold were iPhones.
“Verizon is off to an excellent start in 2013,” says Lowell McAdam, Verizon chairman and CEO, in a statement. “Our strategic investments in wireless, wireline and global networks have given us the platforms to sustain momentum and take advantage of growth opportunities in key markets for broadband, video and cloud services. With ongoing improvements in operating efficiency, we expect continued growth in free cash flow and earnings as we move through the year.”
Verizon continues to expand. This year, it launched additional markets, bringing 4G LTE coverage to 49 markets across the United States. Yet Verizon is also facing growing resistance from its customers, some of whom are taking issue with contracts and their restrictions.
A petition to kill Verizon contracts for wireless service is gaining support from more than 87,000 Verizon wireless customers and others. The petition urges Brenda Raney, executive director of Corporate Communications, to get rid of carrier contracts, saying the pace of the industry create an environment that does not work well with contracts.
“The major handset manufacturers all release updated, newer, faster, more powerful devices much more frequently. Apple and Samsung, the two dominant players in mobile, release a new flagship phone every year like clockwork,” says the petition, created by Mike Beauchamp.
Mr. Beauchamp points to other carriers trying to change the way they sell their devices, such as Google and T-Mobile. Google sold a unsubsidized phone to the public without a contract. T-Mobile also changed their plan and pricing models so that customers pay the full price of the phone (closer to $600 than the common $99 price tag) in monthly installments. Those who want to leave T-Mobile have the option to do so, as long as they pay off the phone.
While the petition has gained some attention, Forrester Research analyst Charles Golvin notes that so far the petition’s backers account for 1 percent of Verizon’s customer base, assuming all of the supporters are Verizon customers. Some of these customers may be among those who want both cheap phones and a contract-free purchase, without realizing that the contracts and service fees are subsidizing the price.
“I think you can have a viable argument about whether those charges are fair or not, or whether they’re gouging and trying to maintain or restrict switching off their customers,” Mr. Golvin says, "but the larger picture is all of the U.S. carriers trying to ween customers off this impression that the phones cost $100 or $200 and make more visible the actual cost of the device."
The petition does address the pricing models, including how T-Mobile users pay full price for their phones in monthly payments. However, Golvin says this points to a larger issue with carriers. At this juncture, they have the task of making known the real price of the phones they’re offering.
“It’s a larger dynamic in the U.S. wireless industry these days where Americans are conditioned to believe that phones have an unrealistically low price because they are subsidized by carriers,” he said.
Despite the complaints, Golvin says, it is unclear as to if Verizon will make any changes to its contracts or restrictions to appease those customers. It will depend on whether or not the petition can rally a majority of Verizon customers.
“If they are sufficiently unhappy with the contract requirement, I think Verizon will respond,” he says. “So far, it seems like despite whatever dissatisfaction, the overall numbers are still very much in Verizon’s favor.”