Verizon’s Simplicity Plan and Another Attempt to Eliminate Device Subsidies

Full Transcript

Don Kellogg 0m10s

Hello, and welcome to the three hundred and first episode of The Week with Roger, a conversation between analysts about all things telecom, media, technology by Recon Analytics. I'm Don Kellogg, and with me as always is Roger Entner. How are doing, Roger?

Roger Entner 0m22s

Hey. I'm great.

Don Kellogg 0m24s

So, Roger, we got some big news this week. New plans coming out at Verizon. Or new plan, I should say, one plan. Tell us about it.

Roger Entner 0m33s

Well, it's the simplicity plan. You know, customers like Verizon. They did not like the price plan. And so after, you know, I don't know how many months, eight months of blood, sweat, and toil by the Verizon team, they came up with a simplicity plan. As you all know, I'm a big believer that numbers and facts don't make decisions, people make decisions.

Roger Entner 0m59s

When you look at that plan, this is a Dan plan, right? Dan Schulman plan. It's an embodiment of how he looks at this. The Verizon team that built this, right, Dan didn't build this alone. Dan does a lot of things, but he doesn't do all this.

Roger Entner 1m15s

But it's built in his ethos. Right? It's a simplicity plan that runs against complexity. It's about value and rewards and all of that. This should solve a large part of the complaint that people had with the Verizon My Plan.

Roger Entner 1m35s

And at the same time, you know, it's really hard to be unique in the industry, but you can bundle things together, and then they become a unique bundle. And so that's what they actually did. When you look at the Simplicity Plan, it's basically, it's the AT&T One Connect plan, $20 cheaper. It's the AT&T Builder plan that we talked about put together on a more modular basis because you can add every line if you're a switcher for $30, if you're in the base, I think it's 45. It has a rewards model.

Don Kellogg 2m10s

Yeah. They stole T Mobile Tuesdays, it's Verizon Mondays, but that doesn't roll off the tongue as much. But, you know, same thing but one day earlier, right?

Roger Entner 2m18s

And ten years later. Right? Yeah. Because T Mobile Tuesday is just at its ten year anniversary. And, you know, my dear friend Ronan Dunn, former consumer chief of Verizon, and former O2 CEO, he innovated that in The UK.

Roger Entner 2m37s

So we need to give him credit for that. And I always rip him off, why didn't he bring it then to Verizon. And then it adds like Verizon dollars, which is like the stored value thing. You get $3 back every month to spend on partner retailers. And that's taken from Xfinity.

Roger Entner 2m55s

What's really interesting here is that the retail partners can supercharge these Verizon dollars, and then your 3% can become 6%, 9%, whatever how many percent that partner wants to do. It is really super attractive on the lower line segments, right? One, two, three, at four, it can go out of whack. With a switcher promo, even there, it's really, really attractive for the existing customers, much harder. The other thing is, Verizon in the past has like gated things like high speed Internet, right?

Roger Entner 3m33s

Like the five gs one welcome plan didn't have that in it. This has it. It has hotspot in it. It has satellite texting in it. So it's a meaningful upgrade to what Verizon had before.

Roger Entner 3m47s

Also, you know, which I think is a welcome step forward again, is the activation and upgrade fees are gone. And that has generally been, how should I say in a nice way? When carriers couldn't make their numbers, sometimes the worst instincts came out. And the easiest way to do it is add an activation and upgrade fee to it and the

Don Kellogg 4m14s

Oh, they're junk fees, right? I mean, and upgrade Yeah. Fees are junk I do think what's notable here is, and we said this with the new AT&T Build A Plans as well, is that the device incentive piece is not there, right?

Roger Entner 4m26s

Devices,

Don Kellogg 4m27s

yes. To the extent that, know, a large part of the cost of switching a new subscriber over is helping them get into a new device. That's not something that this includes or the AT&T plan. The industry in general is walking away from deals like that.

Roger Entner 4m40s

Well, here I would read the fine print, and the fine print has a plus and pro component where you can finance the devices. And so they are not under this construct, like, crediting you back the finance amount. So this is back to the financing. But the people who absolutely wanna have a subsidized device can still have the MyPlan.

Don Kellogg 5m6s

Right. That's significantly more per month. Right? You're paying for it somehow.

Roger Entner 5m10s

Well, you have to pay for it one way or another. Right. Unlike what some people on the Internet think and some quote unquote consumer advocacy people think, these companies are not charities. That thousand dollar $1,200 device, somebody pays for it. And the industry is collectively trying to get off the device subsidy game.

Roger Entner 5m35s

And we talked about it. Yeah. And that it's an unhealthy dependency on devices, especially in a scenario where device prices and subsidies have gone up and up and up, and the upgrade rate has gone down, down, down. So they're throwing more and more money after fewer and fewer people that just cycle through the devices. And it's not a rewarding loyalty, right?

Roger Entner 6m2s

It's rewarding economic behavior that largely only benefits Apple, which has more of the profit of the entire rest of the ecosphere together, benefits Samsung, right? But yeah, it's not a help

Don Kellogg 6m18s

I'm arguing with you, I'm just pointing out Yeah, know. That this is not included, right? And that's an easy way to change the construct, and I agree with everything you said about the wireless industry doesn't need to be subsidizing Apple indirectly. Right? Yeah.

Don Kellogg 6m33s

But I do think it's notable. Right? Because I think folks walking into a store Absolutely. You know, if you're gonna make that switch, you better have devices that are gonna work on the new network. Yeah.

Don Kellogg 6m42s

And they all largely do. But like a lot of folks I think are used to walking in and making a switch and getting a new device as part of that deal, and that's not something that's explicitly included with this deal.

Roger Entner 6m52s

And, you know, now AT&T has done its first attempt twice with the ConnectOne and the Builder Plan. Verizon has made it a plank here. You know, we all listen to T Mobile at the Capital Markets Day where they alluded to the insanity that device subsidies are, and that they want to step back from the ledge. And I think here, they just got covered by two of their competitors. You know, if they want to do that, then they can do it, or it's words, not actions, right?

Don Kellogg 7m26s

Right.

Roger Entner 7m27s

Just wanna point that out, you know, just the way everybody can jointly ratchet up the intensity of competition in a destructive way, everybody can also step back for that. Even without device subsidization, this industry is intensely competitive. Prices are coming down. What people get is getting more. The wallet share is going down.

Roger Entner 7m53s

It's driving plenty of customer value. And by taking out device subsidization, you are focusing on the vast majority of customers who are not upgrading their devices regularly. Right? We're at four year replacement cycle. It's a really small percentage that gets a new phone every year and wants a new phone every year or even every two years.

Don Kellogg 8m16s

Well, and if we're being candid, the upgrades on the devices that happen year over year are not large enough to, you know, it's not changing the world at this point. Right?

Roger Entner 8m24s

Correct. Shame on on the device manufacturers not to make meaningful enough upgrades that not even free devices can get people in the store to buy more of them.

Don Kellogg 8m36s

Fair enough. Fair enough. But I think on balance, it's a good plan. It's a consumer friendly plan. You know, one of the things that Dan Schulman said when he first came on was he no longer wanted to be contributing with the net ads of the rest of the industry.

Don Kellogg 8m49s

And I think this is a, you know, a very competitive offer. It's almost like borderline prepaid pricing in terms of what we're looking at. So being able to get the full power of the Verizon network, not having

Roger Entner 8m59s

For $30 online.

Don Kellogg 9m1s

Yeah. Middle meter wave or the mid band being gated behind, you know, higher up tier plans. You know, I think that this is a meaningful upgrade in terms of the loyalty plan, you know, and then the cash back. You know, there's been some version of this that's existed for a while, but like the formal inclusion of the cash back part, I think is interesting as well. And I think it's a good new look and it's certainly kind of a changing of a guard in terms of the way that Verizon has historically approached plans and pricing.

Roger Entner 9m27s

Wow. That's why we have a new CEO. Right?

Don Kellogg 9m30s

Yep. Absolutely.

Roger Entner 9m32s

We used to talk about it, that you were stupid if you were taking a postpaid plan for one line because prepaid was so much cheaper. Yep. This is solving it at $30 a month if you're a switcher, this is a great price.

Don Kellogg 9m45s

Right. It it harkens back to, you know, Virgin Mobile days. Right?

Roger Entner 9m49s

Yeah. Exactly.

Don Kellogg 9m50s

Which is where Dan comes from. So speaking of changing of the guard, we've got some news at AT&T as well. They've got a new CFO. Why don't you tell us about that?

Roger Entner 9m58s

Yes. So that would be Jennifer Byery. The important part in her biography was joined AT&T in '99, was then CFO of the Warner Media Group from twenty to '22, where a gentleman called John Stankey was CEO at the time. Now that Pascal Desroches is stepping down at the end of the year, you know, Jennifer went for a tour at a company called McAfee, which famous for antivirus and things like that. She stepped down there a couple of weeks ago, and now was appointed deputy chief financial officer, and she will be taken over at the end of the year.

Roger Entner 10m44s

So John basically installed somebody he was very comfortable with, he knew while he was running the WarnerMedia division. And you need to have a personal chemistry and familiarity when, you know, CFO is one of the three most important people at a company, and the CEO and the CFO need to be tight. From the looks of it, he picked somebody he really got along with.

Don Kellogg 11m11s

Well, there's continuity there and Pascal came from WarnerMedia as well, right?

Roger Entner 11m15s

He came from WarnerMedia as well. Yeah. Right? So there's continuity and so I would expect this to be a very smooth transition.

Don Kellogg 11m24s

Alright, we'll definitely keep an eye out on it, and you know, we cover all of these fireside chats that a lot of times, you know, CFOs, and Pascal has done a lot of them, I'm sure that Jennifer Yeah. Will as So we'll as those come up, we'll cover it and stay very close. Congrats to Pascal on a job well done at AT&T.

Roger Entner 11m44s

Onto the next page of his career. Right?

Don Kellogg 11m47s

And onto the next page. Exactly.

Roger Entner 11m48s

So.

Don Kellogg 11m49s

Alright. Alright. We'll talk to you next week.

Roger Entner 11m51s

Thank you. Talk to you next week.