LTE-Only Phones a Consideration for Verizon in 2014

Verizon has revealed that it is considering launching LTE-only handsets. These devices will not have code division multiple access (CDMA) chips. Verizon is hoping that within the next year or so it can completely move in the LTE-only direction.

At a recent Deutsche Bank event, Verizon’s chief financial officer, Fran Shammo, said that his company's goal is to establish voice over LTE by the end of this year. The next step is to start to think about pure LTE handsets in late 2014. This is an effort that over the next couple of years can reduce subsidies.

Shammo said, "We will ultimately get to voice over LTE, probably end of this year, beginning of next year. Then if you look out into late 2014 then you start to think of things like, okay, so now I can start to take the CDMA chip out of the phone and just have a pure LTE handset. That also starts to reduce subsidies. So over the next two to three years I think we will start to see subsidies come down."

Over the past year, it seems that the end of subsidies has been a topic of great interest. In December, T-Mobile USA said that it was planning to stop subsidizing smartphones. They would be the first major carrier to do so. This is a move that T-Mobile hopes will cut costs.

U.S. operators typically pay phone subsidies. This gives their subscribers discounts in exchange for tying them into a two year contract. While this does help to retain customers, the down side is that it also ramps up costs, particularly for the higher priced iPhone.

Lowell McAdam, Verizon’s CEO, also supports ending subsidies. He does, however, question whether consumers will accept the resulting higher prices.

As mentioned above, Shammo sees Verizon moving to voice over LTE. This is a transition that they are planning for ordinary telephone calls and hopes to see it happen sometime toward the end of the year. To this end, Shammo discussed the company’s plan to give high speed fiber access to another 300,000 homes, adding to the 200,000 it’s upgraded since the company began its copper-to-fiber migration last year. The CFO notes that people are willing to pay extra for speeds between 15Mbps and 50Mbps, allowing Verizon to "monetize that fiber network more."

Shammo acknowledged that the cell phone market is getting increasingly saturated. He also indicated to a growing number of MiFi devices (or wireless routers used as mobile Wi-Fi hotspots) on its network. This is leading to a boom in Wi-Fi only tablet sales. While it is true that Verizon might no longer be investing in its 3G network other than to keep it up and running, it seems that having the iPhone 4 available for free when the iPhone 5 launched in September generated "a lot of volume" for the company.