If you read the site often, you know that I really enjoy answering questions in the form of editorials. Jon Rettinger recently asked me to try to sum up why it is that Verizon Wireless doesn’t seem to be offering the same deals as T-Mobile. To me, it’s clear: it doesn’t have to. Let me do my best to explain why.
President Theodore Roosevelt had a foreign policy that was summarized by the quote “speak softly and carry a big stick; you will go far.” The gist of it was, on a super simple level, that the United States could deal with other countries relatively peacefully while carrying a big stick, or the United States military. I think, in some ways, that phrase can best sum up how Verizon has dealt with the wireless landscape in the United States, and why you don’t really see it publicly discussing T-Mobile’s moves and reacting as much as other competitors.
Verizon doesn’t really need to respond to T-Mobile. It’s a perfectly healthy company and one with a stellar U.S. wireless network. That network is its “big stick,” and it’s why Verizon can speak softly.
We saw in its earnings report today that, while it did lose money during the quarter, a large amount of that wasn’t related to the competitive landscape in the United States and was instead attributed to a “valuation of benefits and pension adjustments,” Recode said. Verizon added 2 million postpaid subscribers during the quarter, up a good deal from the same quarter last year and quarter-over-quarter.
Some customers did defect, its churn was about 1.4 percent, and that figure is up, but Verizon Wireless is expensive. Those customers, as the company admits, likely left for better deals elsewhere. Its revenues actually jumped 6.8 percent thanks to new postpaid customers. Why? That reminds me of a fishing story, but it still applies so hang around for a bit while old man Todd teaches a valuable lesson.
When I first picked up saltwater surfcasting (fishing from the shore), I bought a relatively cheap rod and reel. It worked well for me – in fact, the combo was perfect for a few months. But as I started to get more serious about fishing, my gear didn’t hold up. You get what you pay for. In this case, Verizon is expensive, sure, but you pay for really solid nationwide LTE coverage. T-Mobile has a great LTE network when it comes to speeds, but you’ll still find that it lacks when you leave metropolitan areas. T-Mobile admits that much. When you get serious about data – needing a connection wherever you go – it doesn’t hold up as well as Verizon or AT&T.
So in this case, Verizon knows it’s selling you some of the best “gear” out there. Sure, you can go to someone else and pay a bit less, but you get what you pay for. That’s more important now than ever before, especially as we start to see the “internet of things” apply to areas such as connected automobiles. You don’t want a “connected car” that isn’t really connected when you leave the big city, right? So you choose a network that you can rely on more, like Verizon and, to be fair, AT&T. Customers know this – that’s why Verizon’s wireless revenues are up 11 percent over a year ago.
T-Mobile has amazing deals, don’t get me wrong, but even its parent company Deutsche Telecom says those deals aren’t sustainable for the long run. Something will have to give, at some point. That’s another reason why Verizon hasn’t bowed to T-Mobile’s pressure as often. Sure, it added data buckets and now offers Verizon EDGE for $0 down on phones, but it hasn’t given in to roll-over data and hasn’t tried to copy T-Mobile in other areas. Why change a model that’s working? Even if some customers have left for more affordable plans, the bulk of them are sticking around and are willing to pay Verizon’s prices.
That’s my answer for Jon, and for the folks out there who might have wondered why Verizon seems relatively quiet in front of John Legere, who loves to poke at other networks. Because Verizon has a big stick.