Verizon Data Share Plans to Usher in New Metrics to Measure Profits

NEWS ANALYSIS: Verizon’s data share plans will arrive this summer and encourage a new revenue metric for the industry, said CFO Fran Shammo, measuring revenue by multi-device accounts, not users. Shammo added: Verizon’s LTE is ready for an "iconic device."

Verizon Wireless€™ upcoming €œdata share€ plans are indicative of the broad changes taking place in the mobile market and in how Americans interact with devices. These changes, Verizon CFO Fran Shammo said during a hosted conversation with JP Morgan Chase analyst Phil Cusick, at a JP Morgan conference May 16, are even set to change the way wireless carriers measure their success.

While Verizon and other carriers are in constant discussion of their ARPU€”the average revenue per user that they bring in€”initiatives like Verizon€™s data share plans, which will be introduced this summer, will instead begin to necessitate a new metric, said Shammo.

€œIt really won€™t be a revenue per customer anymore, because if you think about the number of devices that will be added to these accounts, it really won€™t be important anymore what the revenue per customer is. It is going to be the revenue per account,€ he explained, according to a transcript from Thompson Reuters.

Individuals, families and small businesses will all eventually be moved onto tiered data share plans, on which multiple devices will sip from a single bucket of allotted data, according to Shammo. In some ways, it may be more efficient, allowing, for example, low- and high-data users in a family to balance each other out. It€™s also more likely to get more users connecting tablets to 4G, instead of just relying on WiFi, as the majority now do.

As Long-Term Evolution (LTE) technology is available in more markets, and people become accustomed to its speed, they€™ll buy bigger and bigger buckets, as it were.

€œThe important part of this is we want the connections to come in, and the way we have designed our plan [is that it is] built on tiers, and as we look at the future growth of LTE consumption€”because of the speeds and video consumption and other M2M-type [machine-to-machine] devices€”it is going to be more important that people will start to upgrade in their tiers as they start to really realize the benefits of the LTE network.€

Until that time, Verizon, which despite being the nation€™s largest carrier has one of the smallest smartphone user bases, still has plenty of room for ARPU growth.

€œWe still have, I would say, many, many quarters€”at least into 2013€”with our basic-phone-to-smartphone upgrade, because we have a fairly low base of smartphones still, compared to the rest of the industry,€ Shammo said. €œWe are coming out of the first quarter at 47 percent [smartphone penetration] €¦ so we still have a long road ahead of us there.€

Helping hurry Verizon down that road will be the next Apple iPhone, which Apple hasn€™t said anything about but which everyone agrees will include LTE and be available from Verizon, among other carriers.

Shammo, speaking to Verizon€™s 4G LTE build-out, hinted that the device was imminent. Explaining that Verizon now has a €œsubstantial€ 4G footprint that will be completed by the end of 2012, and that by mid-2013 it may even exceed Verizon€™s 3G footprint, Shammo explained that its coverage is solid.

€œEven if you have an iconic device come out sometime this year,€ he said, €œwe are ready for that and we will be fine.€