Verizon CFO: Subsidies Will Drop Over Next 2-3 Years

Verizon Wireless Chief Financial Officer Fran Shammo expects subsidies for cell phones and other devices to fall over the next two to three years, meaning consumers will be paying more for Verizon smartphones.

During a speech at the Deutsche Bank 2013 Media, Internet & Telecom Conference, Shammo said that increased competition among operating systems and devices will cause smartphone prices to lower, and thus reduce the costs for carriers.

New devices like Microsoft’s Windows Phone, BlackBerry 10 and other developing smartphone platforms, like the Firefox OS, are driving competition which Shammo believes will naturally lower the cost of subsidies. Lower subsidies will give customer’s more flexibility and lower their monthly service prices.

Early this year, T-Mobile announced it will begin carrying the iPhone and attempt to draw customers in by offering lower subsidies, meaning more customers will pay full price for the device upfront instead of getting a discount for locking into a two-year contract, through what the company calls the Value plan.

While other carriers may begin offering a similar plan, executives are taking a wait-and-see approach and will look at how T-Mobile performs in the market before making any changes.

Shammo said subsidies are a big part of Verizon’s expenses but there are other factors that contribute to expenses as well. Shammo also noted that Verizon will being to launch devices without CDMA chipsets in them as the carrier moves to Voice over LTE technology, which should help reduce the cost of subsidies.