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11 Cities Getting Verizon 5G Beta Test; No Details on Speed or Pricing Yet

Verizon will invite several thousand customers in 11 cities to participate in a “pre-commercial” beta test of its newly built 5G wireless network during the first half of 2017.

The fixed wireless, home broadband replacement will be provided over a limited coverage area in these cities: Ann Arbor, Atlanta, Bernardsville, N.J., Brockton, Mass., Dallas, Denver, Houston, Miami, Sacramento, Seattle and Washington, D.C.

Verizon’s announcement only generally promotes the future potential of 5G service without being too specific about what it intends to offer. We expect the service will be marketed as a wireless home broadband service, not for those on the go. There is no finalized standard for 5G service yet, so Verizon’s adaptation isn’t necessarily going to be the final standard and could change before the wireless provider expands the service to other customers.

“The 5G systems we are deploying will soon provide wireless broadband service to homes, enabling customers to experience cost-competitive, gigabit speeds that were previously only deliverable via fiber,” said Woojune Kim, vice president, Next Generation Business Team, Samsung Electronics.

Verizon’s ability to offer gigabit speeds will depend on several factors:

  • Backhaul connectivity: Verizon will likely choose areas where fiber connectivity is already installed, either as part of its FiOS project or through its fiber connections to cell towers. Because of the very high frequencies involved, 5G connectivity will be line-of-sight and the coverage area will be very limited, within a mile or less of the tower or small cell infrastructure Verizon will depend on to provide service to each neighborhood.
  • Distance and signal quality: 5G service will be distance sensitive and fixed wireless will require the installation of an antenna either pointed out a window or installed externally on a building. The further away, the slower the speed.
  • Shared network: Total available bandwidth on a 5G tower or small cell is shared among all users connected to it. During the initial beta test, speeds are likely to be very high. That may not stay the case as Verizon adds customers to its service.

Verizon has avoided mentioning specific speed tiers, pricing, whether service is unlimited or usage capped, equipment costs, and contract terms. We are also not aware if the service will be marketed by Verizon Communications, the wireline company that also markets FiOS or Verizon Wireless, the mobile operator side of Verizon.

Several of the test cities represent Verizon’s first home broadband invasion on other providers’ turf. Frontier Communications is likely unhappy to learn it faces direct competition from Verizon in Dallas. Verizon sold its landline and FiOS network in Texas to Frontier. Most of the other test cities seem to avoid direct competition with Charter Communications, as almost all are serviced by Comcast. The new 5G service will also compete directly with AT&T in Michigan, Georgia, Texas, Florida, and California.

The Return of the Verizon Wireless Unlimited Data Plan Provokes Wall Street Anxiety

The days of wine and roses from wireless data profits may be at risk, according to some Wall Street analysts, after Verizon Wireless on Monday brought back an unlimited data plan it vowed was dead for good in 2011.

The “Cadillac” wireless network reintroduced unlimited data, phone, and texting this week at prices that vary according to the number of lines on your account:

  • $80 a month for one line
  • $70 a line for two lines
  • $54 a line for three lines
  • $45 a line for four lines

Verizon Wireless last enrolled customers in its old unlimited data plan in 2011, and a dwindling number of customers remain grandfathered on that plan, which began increasing in price last year and has since been restricted to no more than 200GB of “unlimited” usage in a month.

Verizon’s new unlimited data plan is a response to pressure from increasing competition, especially from T-Mobile and Sprint. All of Verizon’s national competitors have unlimited data plans with varying restrictions, and Verizon’s lack of one is likely to have cost it new customer signups last year. The company only managed to add 2.3 million postpaid customers in 2016, down from 4.5 million signed up in 2015.

CEO McAdam swore unlimited data was dead at Verizon

Causing the most irritation is T-Mobile, which near-constantly nips at Verizon’s heels with innovative and disruptive plans designed to challenge Verizon’s business model. BTIG Research analyst Walter Piecyk noted Verizon’s claims it does not need to respond to T-Mobile’s marketing harassment just don’t ring true any longer.

“Verizon has a long history of rebuffing T-Mobile’s competitive moves as non-economic or unlikely to have an impact on the industry for more than a quarter or two, only to later replicate the offer,” Piecyk said. “That was true for phone payment plans, ETF payments for switchers, overage etc. We can now add unlimited to that list. How long will it be until Verizon offers pricing that includes taxes? Despite those delayed competitive responses, T-Mobile has maintained industry leading growth while Verizon’s has declined.”

Piecyk believes Verizon Wireless rushed their unlimited data plan into the marketplace and its introduction seemed not well planned.

“We asked Verizon what has changed to explain such an abrupt reversal, but have yet to receive a response,” Piecyk said. “They had recently been running an advertisement promoting the 5GB rate plan that argued why customers do not need unlimited. The rate plan remains, but it is not clear if the advertisement will. The launch of unlimited seemed rushed, coming a week after the exposure they could have secured with a Super Bowl advertisement. The ad run last night during the Grammy’s did not appear to have taken much to produce.”

Verizon Wireless executives have argued for years customers don’t need unlimited data plans and Verizon would no longer offer one:

  • With unlimited, it’s the physics that breaks it. If you allow unlimited usage, you just run out of gas. — Lowell McAdam, Verizon CEO (September, 2013)
  • At this point, we are not going to entertain unlimited. Promotions come and go. We can’t react to everything in the marketplace.” — Fran Shammo, former Verizon CFO (January, 2016)
  • “I’ve been pretty public saying the unlimited model does not work in an LTE environment. Unlimited is a very short-term game in the LTE market. Eventually unlimited is going to go away because you have to generate cash to reinvest.” — Fran Shammo, former Verizon CFO (March, 2016)
  • Unlimited data plans were “not something we feel the need to do.” — Matthew Ellis, Verizon CFO (January, 2017)

Shammo: Unlimited doesn’t work on LTE networks.

The impact of not having an unlimited data plan appears to have convinced Verizon to change its mind, and that comes as no surprise to Roger Entner of Recon Analytics.

“In three to five years, unlimited plans will come back,” Entner predicted in 2011. He claimed back then wireless carriers were initially unsure how to predict data usage growth on their networks and placing limits on usage gave carriers more predictable upgrade schedules. But after several years of data, Entner said carriers can now better predict the amount of data an average subscriber will use in a month, giving them confidence to remove the caps.

Verizon Wireless’ unlimited plan includes several fine print limitations that provide additional network protection for Verizon and manage any surprise usage:

  • Unlimited use is only provided on Verizon’s 4G LTE network. Limits may apply to customers using older 3G networks, which are less efficient managing traffic;
  • Unlimited not available to Machine-to-Machine Services;
  • Customers with unlimited data plans may find their traffic deprioritized on congested cell sites after 22GB of data consumption during a billing cycle. This speed throttle can reduce network speeds to near-dial up in some circumstances, at least until site congestion eases;
  • Mobile hotspot tethering on this unlimited plan is limited to 10GB per month on Verizon’s 4G LTE network. Additional usage will be provided at 3G speeds. This is designed to discourage customers from using Verizon Wireless as a home broadband replacement;
  • Verizon’s ultimate 200GB monthly limit is also presumably still in place. If you exceed it on Verizon’s legacy unlimited data plan, you were told to shift to a tiered data plan or had your account closed.

Piecyk thinks Verizon’s unlimited data plan may have been rushed out.

Although consumers clamoring for an unlimited data plan from Verizon are happy, Wall Street is not. Analysts are generally opposed to Verizon’s return to unlimited, with many suggesting it is clear evidence the days of high profits and predictable revenue growth are over. That is especially bad news for AT&T and Verizon Wireless, where investors expect predictable and aggressive returns. Verizon has already warned investors it expects revenue and profits to be flat this year.

Jeffrey Kvaal with Instinet believes Verizon’s traditionally robust network coverage is no longer an advantage as competitors catch up and unlimited data is the final nail in the coffin for wireless revenue growth. That means only one thing to Kvaal, AT&T and Verizon must pursue growth outside of the wireless industry. Verizon, in particular, is facing investor expectations it will do something bold in 2017, such as making a large acquisition like a major cable operator.

Evercore ISI’s Vijay Jayant believes unlimited data is bad news for all carriers from the perspective of investors looking for revenue growth.  Jayant told investors in the short term, unlimited data may help Verizon’s revenue because the plans are expensive, but in the long run Verizon is sacrificing the revenue potential of monetizing growing data usage in return for a high-priced, flat rate option. That guarantees “customers won’t see their bills rise, even as their usage does,” Jayant said.

Some analysts point out Verizon’s unlimited data plan is expensive, limiting its potential attractiveness to customers considering jumping to another carrier. While Verizon charges between $80-180 (for one to four devices), AT&T charges between $100-180 for unlimited plan customers, who must also sign up with DirecTV to get an unlimited data plan. T-Mobile charges between $70-160 and Sprint charges between $60-160. The cheapest is T-Mobile, because its plans are all-taxes/fees inclusive. All four carriers have soft limits after which customers may be exposed to a speed throttle. AT&T can temporarily throttle users at 22GB, Sprint can throttle above 23GB and T-Mobile after 28GB.

The Wall Street Journal discusses Verizon’s unlimited data plan and its caveats. (4:55)

MegaMerger: Verizon Approaches Charter Communications About Buyout; Regulators Concerned

Verizon Communications has opened preliminary talks with officials close to Charter Communications about a possible merger of the two companies, concerning regulators worried the massive combined telecommunications company would have a near-monopoly on residential broadband service in New York and western Massachusetts.

The Wall Street Journal reports Verizon is working with advisers to study the potential transaction, and warned there is no guarantee a formal deal will materialize. A merger of Verizon and Charter would combine more than 114 million Verizon Wireless customers, 16 million landline customers, and over 6 million broadband customers with Verizon DSL or FiOS with Charter’s 21 million television, phone and broadband customers. The deal could fetch a price of more than $80 billion, no small amount for Verizon, already $100 billion in debt. An acquisition by Verizon would be a remarkable development for a cable company that became America’s second largest only eight months ago with the acquisition of Time Warner Cable and Bright House Networks.

Preliminary Talks

The newspaper reported Verizon CEO Lowell McAdam has talked with Liberty Broadband CEO Greg Maffei. Liberty has a 25% voting stake in Charter Communications, and Maffei is a close ally of John Malone, Charter’s largest single shareholder. McAdam’s back channel discussions have likely been designed to test Charter’s potential interest in a deal. For Malone and the former owners of Bright House Networks who control another 7% of Charter’s shares, making money appears to be their primary motivation and neither would likely to stand in the way of a deal.

McAdam

The newspaper was less certain about Charter’s CEO Thomas Rutledge. Rutledge is approaching his fifth anniversary as president and CEO of Charter Communications, now greatly enlarged with the combination of Time Warner Cable and Bright House. He spent the last 34 years in lesser roles at Cablevision, Time Warner Cable, and its predecessor American Television and Communications (ATC). Rutledge is reportedly interested in continuing his leadership role at Charter as it seeks to grow even larger, something unlikely to happen if Verizon acquires the cable company and rebrands it as Verizon under their own management. However, Rutledge’s personal interests will likely be secondary to the potential shareholder and executive windfall likely to come from any deal.

A Verizon/Charter Merger Would Establish a Broadband Monopoly in New York and Western Massachusetts

Verizon and Charter are the only significant direct competitors in residential broadband and landline telephone service in western Massachusetts and most of New York State, except a portion of New York City, Long Island and Westchester County (served by Altice’s Cablevision) and Rochester (served by Frontier Communications). A source at the New York Department of Public Service told Stop the Cap! this morning New York regulators would have a tough time approving a merger of this size and scope unless Verizon divested its landline and FiOS network in the state or Charter sold its cable properties in New York. A Verizon divestiture would likely attract Frontier Communications as a buyer, while a Charter sale of New York assets would probably bring bids from companies like Comcast or Altice.

“We would be very concerned about how this would impact broadband service competition and to lesser degree wireline service for New York,” the source, not authorized to speak to the media, told us this morning. “Gov. Cuomo has an ambitious agenda for broadband deployment in rural New York and this deal could also be a problem for the governor’s office. Verizon is perfectly aware of the regulatory challenges such a deal would face in Albany.”

Verizon’s Heavy Dependence on Wireless Was a Mistake

Verizon is under significant pressure to act after Wall Street punished the company for a poor fourth-quarter earnings report that illustrated the days of easy money in the wireless business seem to be over. Verizon suffered the third quarter in a row of sales declines after six years of continuous growth. Analysts point to increasing competition from T-Mobile and Sprint as the single biggest factor for Verizon’s struggles. As Verizon Wireless remained slow to cut prices and remained militant about not giving new and current customers access to unlimited data plans, customers have cut back on services or switched to other providers. Revenue dropped 4.9% in the last quarter and a growing number of Verizon’s most valuable postpaid customers are now leaving — mostly for T-Mobile and Sprint. Wireless churn reached a higher-than-expected 1.1% in the last three months.

Verizon Wireless is also having trouble attracting new customers. Analysts expected Verizon would add 726,000 customers during the last quarter, but only managed to attract 591,000. Wall Street punished Verizon’s latest financial results with a 4.4% slash in the stock price, Verizon’s worst day in more than five years.

Several Wall Street analysts have urged Verizon to diversify its business to reduce its dependency on wireless. In the last three years, Verizon has invested most of its attention and resources on bolstering its wireless network. In 2014, AT&T decided to spread its risk around with significant investments in its U-verse wireline broadband network, an acquisition of satellite-TV provider DirecTV, and its bid to buy content company Time Warner, Inc. In contrast, in 2014 Verizon spent $130 billion buying out its partner’s share of Verizon Wireless. That made UK-based Vodafone cash-rich and left Verizon mired in debt.

So far, Verizon’s diversification efforts have relied on acquiring affordable companies whose best days are long past, including AOL and Yahoo. An effort to entertain Millennials with video clips and other content over its go90 mobile app has largely been a flop, and investments in telematics and machine-to-machine wireless communications are years away from paying off, if they ever do.

Verizon May Want Charter’s Extensive Fiber Backhaul Network

Verizon executives have shown little interest in acquiring assets that rely primarily on linear/live television, which is why the company never moved to counter AT&T’s acquisition of DirecTV with an offer for its satellite competitor Dish Networks.

Verizon is very interested in fiber optics — ironic for a company that largely abandoned expanding its FiOS fiber to the home service seven years ago.

Verizon will need a lot of fiber assets to power the 5G wireless networks the company is interested in deploying. This will require a massive network of fiber-connected “small cells” that will deliver wireless services at speeds faster than today’s 4G networks. These small cells will be capable of serving individual neighborhoods or planned communities and could theoretically rely on Charter’s fiber backbone to deliver service. Without access to Charter’s network, Verizon would have to undertake to build out its own fiber network throughout its service areas.

Regulatory Climate Warms for Big Business Mergers

Although President Donald Trump has voiced his opposition to AT&T’s merger with Time Warner, Inc., his appointments to manage the day-to-day affairs of government are strident believers in deregulation and are unlikely to stand in the way of merger deals. The most likely opposition to a Verizon-Charter deal would come from state telecommunications regulators in New York and Massachusetts. On the federal level, significant opposition may be unlikely. Among the Trump appointees that would likely review a Verizon-Charter merger:

  • Joshua Wright is the leading contender to head the Justice Department’s antitrust division. He’s a conservative law professor who believes regulator reviews of corporate mergers should be hands-off to a degree that has failed to withstand court scrutiny. Wright’s approach during his term as a commissioner at the Federal Trade Commission was so business-friendly, some joked his middle name should be “Laissez-Faire.” He believes mergers rarely have a bad impact on competition and prices and in fact offer consumer benefits. Courts have blocked mergers he supported and judges have criticized his standards of proof that “had no support in the law.”
  • Sen. Jeff Sessions is Trump’s nominee for Attorney General. While Sessions claimed he had no problem blocking anti-competitive mergers and acquisitions, Wall Street believes the Trump Administration will not stand in the way of a frenzy of mergers. Evercore ISI’s Terry Haines made it clear what is likely to come from a Sessions-led Justice Department: “Sessions’ likely nomination and confirmation by the Senate, in which he has served since 1997, is a market positive for merger and acquisition activity. Sessions as attorney general would shift immediately from the current mostly ‘red light’ Obama antitrust/competition policy and move towards one that would be friendlier to M&A activity.”
  • The Federal Communications Commission would also scrutinize the deal, but under the chairmanship of Ajit Pai and a Republican majority, any significant opposition to the deal seems unlikely. Pai has never opposed any major telecommunications merger deal on principle, although he has fought with former chairman Thomas Wheeler over the terms and conditions the FCC sought to impose in return for the agency’s approval.

Charter/Spectrum Relocating Northeast Regional HQ to Rochester, N.Y.

Artist rendition of Charter's new regional headquarters in Rochester, N.Y.

Artist rendition of Charter’s new regional headquarters in Rochester, N.Y.

The northeast region of Charter/Spectrum, encompassing six states, will soon be managed from a new regional headquarters office to be opened in Rochester, N.Y.

Elected officials across western New York joined Gov. Andrew Cuomo to congratulate Charter Communications for its decision to locate its new headquarters in suburban Rochester, where the cable company is expected to add 228 new full-time jobs.

Gov. Cuomo announced Charter will invest more than $2.9 million to renovate its existing offices on Mount Hope Avenue in downtown Rochester and its new 46,000 square-foot facility in Henrietta, which will house regional executives, call center workers, and technicians. New York taxpayers will cover $2.5 million of those costs through the Empire State Development Corporation, a public-benefit corporation that offers tax credits in return for job creation commitments.

“This expansion of one of the nation’s leading cable providers in the Finger Lakes is a clear signal that our economic strategy is driving innovation and transforming the local economy,” Gov. Cuomo said. “Cutting-edge companies are betting on this region like never before and are growing their businesses and creating-good paying jobs in the process. By incentivizing private sector growth, we are generating momentum and strengthening the economy in Monroe County and beyond.”

Cuomo

Cuomo

“By early next year, this beautifully restored facility will allow us to bring together our field operations leadership and vital support functions under one roof,” said Charter executive vice president of field operations Tom Adams. “Through our partnership with the New York State Economic Development Corporation, the Rochester area benefits from an influx of high-paying technical jobs, while our customers across Upstate New York and throughout New England benefit from improved communication, collaboration and efficiency in our operations.”

Time Warner Cable employed 460 workers at its existing office in downtown Rochester. Charter’s new regional headquarters will add 230 workers.

Gov. Cuomo has heavily promoted New York as a new corporate-friendly state to create jobs and grow businesses. The “Finger Lakes Forward” initiative has already spent $3.4 billion in the region since 2012 to invest in and attract key industries like photonics, agriculture/food production, and advanced manufacturing. The plan has seen some success for the key regions of Rochester (photonics), Batavia (milk/yogurt production), and Canandaigua (mixed manufacturing), but has not been as successful keeping jobs when businesses have downsizing on their mind.

For Rochester, Charter’s announcement will still result in a net job loss of more than 300 jobs in the telecommunications sector because of Verizon Wireless’ announced closure of its Rochester call center, which will eliminate 645 jobs in the area when the facility closes Jan. 27, 2017. The governor’s office called Verizon’s job cuts “an egregious example of corporate abuse.”

Cheapest Thing Verizon Wireless Employee Ever Sold: Your Private Customer Records

vzw-for-saleA Verizon Wireless employee is facing up to five years in prison for peddling customer phone records and location data to private investigators for as little at $50 a month.

The employee, Daniel Eugene Traeger, worked as a network technician for Verizon and agreed to supply a private investigator with private customer information for a pittance, making it perhaps the cheapest service ever offered with the Verizon Wireless name attached.

Traeger’s lawyer worked out a plea agreement with prosecutors that could substantially shorten his possible sentence for pleading guilty to a felony count prohibiting unauthorized access to a protected computer. The Consumerist obtained a copy of the plea agreement.

Traeger quickly adopted the Verizon Wireless way of doing business, substantially raising his snooping rate to as much as $750 a month by 2013.

In all, prosecutors claim he earned more than $10,000 selling customer data using network tools readily available to Verizon’s network technicians.

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