Verizon Wireless Is the Highest Used Wireless Provider in the US - Case Study Example

Verizon Wireless: Case Study Introduction Verizon Wireless is the highest used wireless providing within the United States. Through a series of mergers and acquisitions, the network has grown in power and position within the industry. The company has been profitable, helping to bolster the limping parent company which is not having the same level of success from all of its holdings. The marketing plan has been developed through a carefully planned set of structures from which they can provide overall service. The company has provided the United States with a great many jobs and is showing increases each year as the technologies for wireless usage is seeing advances at a quick pace. However, there are several problems with the technologies that Verizon has available that are causing some concern with consumers. In addition, their pricing is well above the average and in the current economy will not encourage consumers to come to their service. Prepaid services are extremely limited and with the number of displaced workers and people who have experienced problems on a financial level, these limitations will hurt their bottom line where increases from alternative forms of service are considered. As well, the iPhone, although a great benefit to the company product line, is currently seeing problems in the way in which consumer groups are rating the product, thus causing problems in promoting the product. As well, AT&T are claiming that they are the only network on which the iPhone can be used for both voice and data at the same time. This deficit in technical capability will hamper the marketing capacity that Verizon has for the product, putting their service in a secondary position. Industry and Company Overview The wireless industry, within the last decade, has taken over the land line industry through increases in product technologies and wireless access technologies. By 2004, the number of minutes used by wireless customers had reached 1 trillion, but in the three years that followed the number doubled to 2.1 trillion. Wireless communications are now used by 80% of the population and exceed 250 million users. The wireless industry invested 24 billion dollars in 2007 and is the resource for employment of 3.4 million Americans. Instant messages are out distancing e-mails as the preferred form of instant communication. The changes in the way in which people communicate through the technologies of wireless and broadband have revolutionized communications in the world (Verizon Wireless, Inc.) In 2007, worldwide revenue for telecommunications through wire line and wireless revenues accounted for about 1.65 trillion dollars. Wireless and broadband provided the most growth in the industry in the following years, will likely result in a market of 2.27 trillion dollars by 2012. Outside of the United States, the telecommunications market is seeing high levels of growth, especially in China, India, and Latin America. Developing nations have used telecommunications as a launch point from which to create jobs and emergence of industry. Verizon reports that the fastest -growing online populations can be seen coming from Brazil, Russia, India, and China with China having already exceeded the number of United States internet users. It is projected that 40% of the internet users on a global level will come from Asia (Verizon Wireless, Inc.). (Verizon Wireless, Inc.) Verizon Wireless, Inc is a telecommunications company that provides wireless products and services within the United States. Verizon Wireless has the combined efforts of Vodafone and Verizon Communications (Verizon Wireless, Inc. The company was begun in 1995 and has its headquarter in Basking Ridge, New Jersey as a subsidiary to Verizon Communications Inc. The company was a newly marketable invention of the former company Bell Atlantic Mobile. Some of the products and services that are included in the Verizon Wireless family are wireless phones and service, pre-paid phones and services, accessories for their products, internet access, wi-fi access, calling card services, and an increasing number of services that are associated to wireless technologies (Verizon Wireless, Inc., Bloomberg). Comparison of Wireless Services between 2009 and 2010 (Comscore 2011) Verizon Wireless, Inc. was responsible for the first wide - area wireless broadband networks and created the first 3G network for multi-media service. The services for Verizon are available in over 200 countries throughout the world and the company intends to launch 4G service throughout its current network during the year 2011. The company has over 102.2 million customers, more than 82,000 employees and more than 2000 company owned stores and kiosks. The company claims its revenue for 2010 exceeded 63.4 billion (Verizon Wireless, Inc.). The company is one of the top wireless providers in the nation and has innovated many of the provisions available for wireless technologies. Wireless revenue for Verizon Wireless grew by 5.1% over 2011, although the parent company saw an overall decline of 1.2% which is attributed to falls in their wireline revenues. Verizon is projecting revenue growth of 4-8% in 2011, much of its hope on the increasing overall percentage of Smartphone users coupled with their own distribution of the Apple iPhone which began in March of 2011. The end of the monopoly held by AT&T will signal an opportunity for Verizon to gain customers from AT&T, plus the possible switch from users of other networks. Current challenges within the United States include issues with internet and cable provision, with FIOS subscriptions slowing in 2010. The largest challenge is outside of their control with the national GDP having been at 2.74% in 2010 and expected to drop in 2011 to 2.25% (HIS Global Insight). Marketing Overview Verizon has grown through a system of mergers and acquisitions. The first merger occurred at the inception of Verizon when Bell Atlantic Mobile merged with Vodafone in 2000 to form the Verizon company, doing business as the Cellico Partnership (Plunkett). In 2008, Verizon Wireless, Inc. acquired Alltel for 5.9 billion dollars with an agreement to assume their debt of 22.2 billion dollars. In doing so, Verizon acquired 13 million customers from Alltel and allowing for tax benefits from the incurred debts that were manageable for Verizon. Verizon is currently the top wireless company in the United States with a 31.1% market penetration with the closest competitor being AT&T at 25.2%. Even with the monopoly that AT&T had on the Apple iPhone, Verizon still beat out AT&T in its market penetration (Bode). Top Wireless Company Market Share Penetration The types of telephones used by cellphone users are relevant to the future of the market for providers of wireless service. While the top five cell phones brands do not include Apple, the second most used Smartphone is the Apple iPhone. Since Apple only uses one basic model of phone for its product line of phones, the fact that it is the second most used brand of phone is impressive. Through the creation of an elitist connotation on the iPhone user, Apple has managed to create an unprecedented demand for its product. The branding of the iPhone is iconic, creating a powerful marketing advantage through providing a service that is innovative and that confers status. The phenomenon of the iPhone is now available to Verizon and is intended to provide an added incentive to choose Verizon for service. Verizon strives to create innovative marketing solutions through technologies that relate to their product line. One marketing approach that was done in 2007 was to partner with Wachovia in an effort to increase online bill pay in order to reduce the per customer costs per payment. The partnership included advertising to Wachovia customers the advantages of online bill pay with Verizon, while advertising in tandem to their own customers about Wachovia banking services (Griffin 231). Marketing Issues Voice Communications One of the chief problems with Verizon Wireless, Inc. phone service is that it uses the CDMA (Code Division Multiple Access). While CDMA has a higher capacity for speed, GSM (Global System for Mobile Communications), GSM is available on a global level. A sim card is used in phones for the GSM network which means that the network is keyed to the card, rather than to the phone, allowing the user to switch sim cards to different phones. The R-UIM card is the equivalent for the CDMA, but this is only available on a limited basis in Asia and has not yet penetrated the US market. Wireless carriers that use CDMA include Spring and Virgin Mobile as well as Verizon. Carriers that use GSM are AT&T and T-Mobile (Kayne). The advantages of GSM over CDMA lie within the maturity of the technology, with seasoned and well established manufacturers, technical analysts and equipment operators who can attend to the system. However, CDMA has the potential to remedy some of the problems experienced with the older system. In addition, CDMA is better suited for 3G and 4G use. However, because of the sim card issue and the global system as it is in place in a far greater area of the world than is CDMA, not having phones that are associated with that system creates a problem in global communications (Talukder, Roopa, Yavagal, and Hasan Ahmed 239). With the growing economic problems in the United States and with so many people losing their credit ratings due to losses incurred through income reductions, the pre-paid cell phone has become an important part of the nature of cell phone usage. However, one of the weaknesses in the current line of products for Verizon Wireless is that there are a limited number of phones available for prepaid service. There are six Smartphones available, two blackberries, and eight feature phones. This means there are sixteen choices on phones for prepaid service. For monthly service, there are thirty-three Smartphones, plus two iPhone options, not including the number of feature phones. The Smartphones and Blackberries available for prepaid service range in price between 200 and 400 dollars, making upgraded technology difficult and expensive for anyone trying to reestablish a life after economic hardships. The costs of monthly unlimited service including talk and text on a Smartphone with Verizon are $94.99 (Verizon Wireless, Inc). For T-Mobile unlimited talk, text, and 2GB of data per month, the cost is $70 per month and for AT&T, the costs for unlimited talk and text with 200MB of data is $75 (T-Mobile: AT&T). Comparison of Prepaid Monthly Plans (1500 minutes substituted where no monthly plan) Upon initial research the drop in signal on the iPhone 4 has an explanation that is quite surprising. The antenna is placed in the outer metal rim of the device and when held in the left hand, the bars will decrease because the main support is in the lower left corner which is covered when held in the left hand (Zeman). However, despite the easy explanation for the problem with reception, the fact that the design is flawed in such a simple fashion does have cause for worry. Consumer Reports did not give a very good review for the iPhone 4. The problems with dropped calls and poor reception have caused the consumer reporting agency to not recommend the product for the second time. While Verizon, via a comment by Chief Technical Officer David Small claims that the problem is exaggerated and would not have passed their standards tests if it held any significance. However, Consumer Reports does not agree, therefore the sales of the product may not meet the expectations that Verizon has placed on its sales (Gross). Data Issues CDMA has a one code per user designation, which works very well for voice transmission. However, the use of data outside of the voice is limited by the one code per user form. The multi-CDMA allows for the number of codes needed to transmit is picked up by the user (Chen). However, the number of users is limited, thus when more people are using more codes, the amount of codes available decreases. The limitations for data use on CDMA counter the advantages and as the number of Smartphone users increase, the system will begin to show evidence of being spread too thin. Another problem that is being addressed during television commercials is that voice use during data usage is not possible. AT&T are advertising that their network is the only one on which the iPhone can talk and surf the web at the same time. This is a great disadvantage to Verizon and is creating a ’secondary’ insinuation about their position in the iPhone usage capacity. Users of iPhone want the best in their provider; therefore this suggests that using Verizon will not allow the iPhone to act at its optimum capacity for usage. This is a big problem and will need to be addressed by Verizon if they want to compete. In this case, breaking the monopoly that AT&T held over the iPhone technology is being challenged through highly competitive means. If this issue isn’t addressed, it could mean a less than enthusiastic reception by those desiring to have an iPhone where Verizon is concerned. Verizon has some real issues with their monthly plans. As shown, their costs are high where the prepaid plans are concerned. The largest deception, however, has occurred where unlimited data usage has been found to not be an accurate statement regarding data plans. Within the terms of usage there is a stipulation that the plan may be terminated if more than 5GB are used per month and if the usage involves a great deal of downloading and streaming. The service requires that there be a primary internet provider outside of the monthly service, thus limits are appropriate. This means that the unlimited plan is not unlimited, thus creating a great deal of issues for users who are not getting what they thought they were paying to receive. Conclusion The Verizon network has some real issues as the technologies of the future emerge and the cost/benefit balance is weighed by consumers. AT&T has presented a real challenge for Verizon because despite losing the monopoly of being the only network to offer the iPhone, they are promoting themselves as the only company to truly support all of its capabilities. In addition, the issues with being on the CMDA system provide a complication that will have to be addressed. While the system is increasing in technological capacities and it is unlikely that Verizon will, or even should move away from the system, not having any ability to connect to the GMS system limits cell phone coverage on a global level. Data is also yet to be fully supported by the CMDA system. There is no doubt that Verizon is a strong company, however, the way in which some of the issues are handled is creating a publicity problem. The iPhone issues are being denied, rather than being addressed. In addition, by creating an unlimited program that is only valid if used within certain limits creates a deceptive practice that will harm public opinion of the company. Public opinion is more valuable than the benefits of deceiving the public to promote a product. Most of the activities of Verizon have been successful as in evidence by the power that the company has through its market share. There is still room for improvement. As technology advances and the emergence of better and stronger technologies continue to change the industry, the market will be ruthless as the best possible choices for the consumer will emerge past the prestige that a company has already built and will be evaluated on their true value. Works Cited AT&T. 2011. Web. 12 April 2011. Bode, Karl. Wireless Market Share by Device. Broadband DSL Reports. 7 May 2010. Web. 12 April 2011. Chen, Hsiao-Hwa. The Next Generation Cdma Technologies. Chichester: Wiley, 2007. Print. Comscore. Comscore reports March 2010 U.S. Mobile Subscriber Market Share. Comscore. 6 May 2010. Web. 12 April 2011. Cybernet News. Verizon Admits that their Unlimited Data Plan is Limited to 5G per Month. Cybernet News. 2011. Web. 12 April 2011. Graham, John R, Scott B. Smart, and William L. Megginson. Corporate Finance: [linking Theory to What Companies Do]. Mason, OH: South-Western Cengage Learning, 2010. Print. Griffin, Jill. Taming the Search-and-Switch Customer: Earning Customer Loyalty in a Compulsion-to-Compare World. San Francisco, CA: Jossey-Bass, 2009. Print. Gross, Doug. Consumer Reports Doesn’t Recommend Verizon iPhone 4. CNNTech. 25 February 2011. Web. 12 April 2011. Hackel, Kenneth S. Security Valuation and Risk Analysis: Assessing Value in Investment Decision-Making. New York: McGraw-Hill Professional, 2011. IHS Global Insight. Verizon’s Q4 Revenue Down 2.6% as Wireline Business Declines. IHS Global Insight: Country and Industry Forecasting. 26 January 2011. Web. 12 April 2011. Kayne, R. What is the difference between GSM and CDMA? Wise Geek. 6 April 2011. Web. 12 April 2011. Kurtz, David L. Contemporary Marketing. Australia: South-Western Cengage Learning, 2011. Print. Plunkett, Jack. Plunkett’s Telecommunications Industry Almanac 2007. Houston, Tex: Plunkett Research Ltd, 2007. Internet Resource. Talukder, Asoke K, Roopa R. Yavagal, and Hasan Ahmed. Mobile Computing: Technology, Applications, and Service Creation. New Delhi: Tata McGraw Hill, 2010. Print. T-Mobile. 2011. Web. 12 April 2011. Verizon Wireless, Inc. Verizon Wireless. 2011. Web. 12 April 2011. Verizon Wireless, Inc. Bloomberg Businessweek. 12 April 2011. Web. 12 April 2011. Zeman, Eric. iPhone 4’s Reception Trouble Not Unique. Information Week. 25 June 2011. Web. 12 April 2011. Read More