Why does Verizon charge so much?
The reason why Verizon is expensive is attributed to its strategic plan of offering high-quality services at a premium price.
Verizon is a well-known telecommunication company in the United States that offers wireless services to more than 150 million customers. However, Verizon has also come under criticism for having some of the worst rates in the industry. But why does Verizon have to overcharge for cell phone plans and other services in the first place? These are some of the reasons that can be attributed to Verizon’s relatively high price compared to other telecommunication companies.
Network Quality and Coverage
The caliber and reach of Verizon's networks also provide the company with the ability to establish premium rates. Verizon has been especially more dedicated to its network investment; the business has invested billions of dollars over the years to improve and grow its 4G LTE network. Regarding speed, dependability, and accessibility, their network often beats root metrics and other independent tests. With over 98% population coverage throughout the United States, Verizon claims today to have the biggest and most dependable 4G LTE network available. Therefore, a bonus is most consumers are ready to pay more for a better network.
Spectrum Holdings
One of the reasons why Verizon’s network is very strong is because they have acquired a lot of wireless spectrum and these are the radio frequencies that support cell signals. After several multi-billion dollar spectrum acquisitions in the last decade, Verizon has acquired roughly 45% of available low-band spectrum licenses. Although they are few and offer less coverage, Verizon has an excellent opportunity to exercise strong control of these low-band airwaves. But having these scarce spectrum assets, Verizon has the upper hand and can therefore set higher prices.
Marketing and Branding
Currently, Verizon has developed a strategy of positioning and branding that depicts it as a superior-quality telecommunications network. For instance, Verizon by using the ‘Can You Hear Me Now’ campaign has marketed itself as a company that delivers services dependably. This branding enables Verizon to charge a higher price compared to other low-cost carriers in the market such as Tracfone and Cricket Wireless. Verizon has many customers willing to pay a premium for the brand they are familiar with and have used before.
Customer Service and Retention Offers
However, they offer higher prices for their products and services; Verizon has always been coming out tops in customer satisfaction surveys and indices. Being a loyal Verizon customer, it is critical to note that the organization’s customer service keeps most of its users attached to their services despite the possibility of switching to other cheaper services. It means that Verizon does not need to be as price-sensitive with its retention offers and promotions because of its loyal customer base. However, T-Mobile and Sprint depend much on subscriber retention deals because their churn rates are higher in terms of the sizes of their customers.
One of the most significant factors that contribute to the poor performance of new businesses in the early years of operations is the absence of fierce competition in rural areas.
In many suburban and rural areas, Verizon remains the only service provider that offers coverage. With their focus on blanketing the country with connectivity, potential customers outside urban corridors often have only one option for mobile service: Verizon Wireless as its primary service provider of Wireless Communications. It is for this reason that Verizon can set its prices higher than it would if these customers were to hop on to the next best service provider. Verizon only lowers rates when their monopoly and customers’ dependability on them is threatened.
Higher Profit Margins
Being one of the incumbent wireless carriers, Verizon has the duty and interest of shareholders to report and maintain the profit increase constantly. In the telecommunications industry in the last decade, Verizon has had some of the highest profit margins and has been recording well over 20% on average each year. During this time of its growing profits, Verizon has consistently raised the cost of its plans, as well as introduced fees that were most lucrative. Due to their many subscribers and the use of the word ‘premium’ in their services, Verizon can afford to hike charges to fit the profit objectives.
Bundling Services
Similar to other telecommunications companies, Verizon then offers mobile packages with other services such as streaming services. Verizon can tie you into their network through a bundle of your wireless with Fios home internet or their new BlueJeans video conferencing. After having bundled several services, it becomes very hard to switch to another carrier even if they offer cheaper cell phone service. The right combination makes it difficult for the competitors to gain ground or force Verizon to lower its charges.
Verizon Mobile Communications currently charges a slightly higher price compared to other national wireless carriers and this is justified by the fact that, for the companies’ loyal customers, the benefits of getting to use Verizon’s superior network coverage, quality, and the company’s well-established brand name outweigh the slightly higher prices for monthly service fees. However, the enhanced competitiveness from T-Mobile, AT&T, and other players puts pressure on Verizon to keep proving the need and worth of return that consumers have in terms of value for the amount they pay.
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