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On the Hot Seat: Verizon Wireless CEO Lowell McAdam
At last week's CTIA Wireless I.T. & Entertainment conference in San Francisco, FierceWireless editor-in-chief Sue Marek and FierceMobileContent editor Jason Ankeny sat down with Verizon Wireless CEO Lowell McAdam to talk about competition, WiMAX and the formidable iPhone.
FierceWireless: AT&T recently announced that it added 2 million net new subscribers in the third quarter. Are you concerned about them?
McAdam: They have always been a difficult competitor. The big-four are always banging away at each other. The regional carriers are very strong in their individual footprints. I think AT&T having the iPhone is similar to when they had the [Motorola] RAZR a few years ago. They were strong with that and we answered with our devices. Now we are going to answer with the Voyager. The thing I like about this industry is that from Day 1 it has been competitive and it's going to stay competitive. That's why I took the time to testify at the Senate committee last week. When you have great competition like this we are focused on beating the competitor and winning with customers and that's why you don't need the regulation.
FierceWireless: You mentioned the iPhone. Do you have any regret passing on that?
McAdam: None whatsoever.
FierceWireless: Why not?
McAdam: When we evaluate a product we look at the customer experience. We look at the technology of it and we look at the financial model around it. From a customer perspective we didn't like the restricted distribution. We didn't like the fact that we were being asked not to service customers. Let's just assume the model you see from AT&T is what they asked us to do, so I'm not divulging anything. We have a huge network of stores and we put a lot of investment into training our people. The model was to say to a customer 'thanks for coming in, now go down the street to Apple and they'll take care of you.' We didn't like the customer model. The technology was stuff that could have been dealt with.
The financial model, if you assume the financials that the European countries have said publicly what theirs was, we've made a $40 billion investment in our network in the last eight years. I don't think that revenue split was commensurate with the investment we made in the network. We are very happy with that decision.
As we roll out the Voyager, we are going to be happier. The Voyager takes things to the next level.
FierceWireless: Why did you decide to withdraw your FCC appeal for the 700 MHz open-access rule?
McAdam: We withdrew the appeal because it was clear we weren't going to get it expedited. Now CTIA will carry the torch for us.
FierceWireless: Are you glad that you cut a licensing deal with Broadcom so you wouldn't be impacted by the ITC ban on EV-DO and WCDMA chip sets?
McAdam: Yes. This could disrupt your whole supply chain. When you are trying to meet customer demands in the fourth quarter you don't get a second chance. We're very satisfied with this.
FierceWireless: When AT&T Wireless and Cingular first merged the result of the combined company was a carrier with a very large subscriber base. But there was a belief in the industry that Verizon would soon surpass the newly-merged Cingular (now AT&T) in subscribers. That hasn't happened.
McAdam: Yet. If you take a look at the numbers, where we focus is on the post-paid customer. We focus there because of the loyalty of that customer, the ARPU that they bring and the fact that that customer wants a reliable network and that is what we are all about. The difference between the total subscriber counts is just wholesale. From a retail perspective, we are bigger than they are. That's why we have higher revenue and better EBITDA margins. The model that we have adopted, we're clearly winning in that area. More sales to wholesale, that's fine. When a customer doesn't use your brand, they aren't loyal to you. They could easily go somewhere else.
We have seen the rise and fall of wholesalers and MVNOs. Even if it's ESPN or an Amp'd Mobile or the old-days of MCI, if you remember them, our view is that as the market becomes more competitive, as you further penetrate the market there prices will go down and there's less margin for a wholesale company to live on. That doesn't mean we won't go after that part of the business where it makes sense. Onstar, as you know, is part of Verizon's network. They will pay for the liability and they got it and there are customers there. That's a good model.
But being a straight prepay--most are prepaid today--or even a content version. Like ESPN is a good version. They had a product that was good, but why pretend you're a carrier? When they decided they had enough, they came to us.
FierceWireless: Given that you work with partners such as ESPN, which is a big content partner, do you see Verizon producing its own content? Last week Sprint announced an initiative to do this.
McAdam: I would say it's a big hurdle for us to want to do that. That's something that has been on the radar--I didn't know Sprint announced something like that.
FierceWireless: Sprint has a dedicated studio for it and they brought in some talent to host two- or three-minute shows. Most of the focus is on sports and lifestyle content.
McAdam: My answer to that is there are a lot of smart people out there that know how to do content. I would much rather do a deal with those smart people than try to be smart. We are good at building networks and building distribution. We are good at customer service and product development. That is one aspect of product that I would rather go do a deal with whatever the hottest content is rather than try to be on the leading edge. That's not a skill set for us.
FierceWireless: Speaking of Sprint, what do you think of WiMAX?
McAdam: I'm an engineer by training. My first jobs--back in the phone company Pacific Bell--were in new technology introduction. There is always the next-generation of technology that holds a lot of promise. The suppliers of that technology would love to get you to declare early on. My view is whether it's WiMAX, Rev. C or LTE, you make the visionaries deliver something. You evaluate what they deliver and then you decide what fits best in your network. WiMAX still in my view, there is a lot of talk about it, but let's see it work in the marketplace. Technology is technology. There's no emotion about it. Let's see how it performs.
There are also a lot of questions about LTE, but you have people running around saying that Verizon is going to go with LTE. We have said we will do a field trial and we will evaluate it. Then we got our wish list in front of the suppliers and that's where it is.
That's where we are. We'll see. I wouldn't be surprised if we use it somewhere. But I can tell you we aren't going to have three different technologies in a consumer commercial network. You have to be very good at delivering if your brand image is reliability, you have to be very good at delivering. No one delivers very well when you have that many different technologies running around in your network.
FierceWireless: You will do a trial of LTE. Will you also trial Rev. C and WiMAX?
McAdam: Yes, absolutely. Vodafone has said that they will be involved with a WiMAX working group and we're working with Vodafone on LTE. We'll see. When it's 2010, we'll have an interview on how we are making the final decision. But 2007 is a little too early.
FierceWireless: Let's talk about MediaFLO--can you give us any anecdotal information about who is watching it?
McAdam: In order for MediaFLO to take off we have to have more cities covered and more coverage in the cities that we do. What we see at this point is a younger set and I thought it would be more male because of the sports but it's not because of the diversity of the programming. All you can say at this point, is it's a younger bent--18 to 30 age group.
Usage is what they expected but the more coverage you get, the better. It was the same with voice services and with SMS. If we get more scale and more handsets, that will help. The new Voyager handset will have MediaFLO as well. That will help. If you have a mainstream handset that people love and it also has a feature on it, that will help it as well.
It's going about the way I expected it to go. I think in 2008 and 2009 we will hit the right mix of coverage, programming and handsets.
FierceWireless: I've spoken with a few different ad companies at the show. We hear a lot from them about how you guys feel about mobile advertising. The party line seems to be that you are interested in the revenue opportunity but you have a lot of legitimate concerns about invading customer privacy. Is that true? Is there change in the mindset of how to seize on this opportunity?
McAdam: The safe answer to your question is that whatever they told you is not true. We really are very focused on what customers tell us they want. We do something called a net promoter score survey with every customer after their interaction with us. We ask whether they would recommend us or not to a friend or relative. That helps us set up everything from spam filters. We block between 100 and 200 million text messages a month coming from outside our network. Most are from eastern European countries that are either pornography or some sort of fraud on our customers. We're careful about that. We are not trying to be Big Brother but 60 percent of our base is family share. No one wants our kids to get the kind of messages that we block out of those eastern European countries.
Advertising is certainly not as sinister as that. I don't want to insinuate that. But it's a similar invasion of customers' privacy. So we are going to move cautiously and listen carefully to what our customers tell us. There's this huge pot of gold from a revenue perspective and that's motivating a lot of people's behavior. I think that's why you see all the activity you see on the regulatory front because a lot of companies are trying to dip into that mobile advertising barrel.
I think the point of it for us is that we are who the customers look too to provide them the services they want. We are going to let them define what they want around advertising. Do they want location-based things sent to them? Do they want local promotion? If so, we'll do that. Having the customer in control of it as opposed to having the carrier ram things down their throat is an important distinction.
FierceWireless: One question that I'm hearing a lot at this conference, is what is the business model for entertainment? A lot of people think advertising is the answer.
McAdam: In my career, there is no silver bullet for anything. I don't buy that there is a holy grail of advertising that everyone will love. Someone has to pay for this stuff.
Comments (28) | Post a comment
Comments
Posted by Anonymous | October 30, 2007 - 2:39pm
Very nice interview, presented a good comentary on what verizon is focusing on for it's mobile services.
Posted by Anonymous | October 30, 2007 - 2:47pm
He is a joke - how about the fact that they disable phones and make it very difficult for anyone to use a Verizon phone to get to the Internet? Is that for the customer or to protect their turf?
Posted by Anonymous | October 30, 2007 - 3:14pm
Good interview. Sensible comments esp. on iPhone and AT&T.
Posted by Anonymous | October 30, 2007 - 3:20pm
Person claiming that Verizon phones are disabled and make it hard to get on the internet is misinformed. It is very ignorant to make accusations without foundation.
Posted by Anonymous | October 30, 2007 - 3:21pm
you are an idiot. you have no idea what you are talking about.
Posted by Anonymous | October 30, 2007 - 3:37pm
Verizon rocks. They really care about their customers. I would never use anyone else.
Posted by Anonymous | October 30, 2007 - 4:26pm
Huhhhh? Your Mama
Now that all of the 3rd grade school yard debating is done..... Verizon just does not want to be first on the advertising. We pay for a theater movie and get pre show ads crammed down our throats. It wont be long until ads are on our cell phones. I dont mind ads on yahoo or google as I am not paying to use their search engine. I dont mind it on TV as I dont pay for TV. I do mind when I am paying for the service. No quality cell phone company will give free service with ads or paid service without. If they all start sliding ads in then we cattle will Moooove along with it and not complain.
Posted by Anonymous | October 30, 2007 - 4:27pm
The phone is not disabled. You simply have to susscribe to that feature. What you want something for nothing? You are already getting an expensive handset subsidized by the carrier what more do you want. I love people who don't want to pay for the services they wan't. It wouldn't be called capitalism if it was free.
Posted by grquill | October 30, 2007 - 4:46pm
I believe Verizon will be here for the duration. That means they will face a decision in which the current network technology has to be replaced with a proven technology. their day is coming sooner than 2010! The customer will leave. Wordperfect is a great example. Verizon should be hearing the clock ticking and being smart, they are working quickly to position themselves with a winner.
Posted by Anonymous | October 30, 2007 - 5:20pm
I think Verizon concentrates more on the future then the now. The iphone was huge in the beginning for at&t but after that first pop they have nothing but a phone that is clearly technologically inferior to other phones on the same network or other networks (even t-mobile). Phones come and go and kids moods change on what is and isn't cool. Don't market products...market service when you are in a service industry. If you were a doctor would advertise that your equipment is better then other doctors or your skill is better? Even if it isn't better Verizon has the market believing they are the most reliable network so people come to them for service not a particualr phone. at&t has people buying phones but what happens when that phone gets old and outdated (it already is)?
Posted by Anonymous | October 30, 2007 - 5:36pm
To the person above me...about paying for a service not a phone truly sees what Verizon is about. Sure its fun to have a cool phone but when your broke down on the side of the road, does it really matter that I have a touch screen?
Posted by Anonymous | October 30, 2007 - 11:26pm
iTouch + bluetooth + EV-DO Rev A = iPhone killer. No need to wait for 2010... it's here now. Verizon doesn't react to every fad. They don't have to... they have the best network.
Posted by Anonymous | October 31, 2007 - 4:19am
This interview is very careful spin for Verizon. But forget all the "we have a cool new iPhone killer called...", let's just focus on the issue of competition and choice (or lack there of for those that sign up for Verizon). It sounds like the self-satisfied PR messages of the Communist Central Committee on how happy the people are.
- Competition: "We have strong competitors, we don't need any regulation" (paraphrased)
Life is comfortable when 3-4 big companies have friendly competition within well defined rules. Any business text can go through the details - no need to repeat the obvious. Don't pretend this is the same as actually giving customers full choice and control of what phone they buy, where, and from whom and with what services or on what network they can use it after they paid for it. Verizon's high EBITDA is only partially due to a great network (it is) and a reputation for delivering the goods (they do). It is also from hiring more lawyers than anyone else to sue the FCC and lobby congress to protect their absolute and singular control over their customer's choice. They earnings are certainly not from blocking "Eastern European porn" (a total side issue - no other network is swamped with porn so it is not a differentiator - instead show us the truth about blocking legitimate messages consumers opt in to receive, but can not due to no-free-press behavior if you choose communism - I mean Verizon).
- Choice: His expressed ideas on advertising are admirable. Customers should only receive ads if they opt in to get them. But that is not an issue of debate. The issue is - who will have the right to give customers ad-supported services and how much tax do they have to pay to the carrier to deliver those services? If only Verizon has the right to deliver tier 1 service, or the only way a third party can do this is by crippling their business competitiveness and giving 50% of their revenue to Verizon, this is extortion of a dominant position in one market to extend it into another. Sound familiar? Customers want choice - not just choice within Verizon's walled garden and a second class "open" (but in various complex and hard-for-the-public-to-understand ways less capable) service for everyone else. As an Engineer McAdams knows there are no technical barriers to opening - there are many examples, and if they need help many are willing to show them how. There is however a lack of will and motivation. The issue for Verizon is keeping EBITDA un-naturally high by excluding competition unless they pay extraordinarily high taxes (sorry, "revenue share"). I say dump the tea into the harbor instead and switch to any competitor that offers openness and the personal freedom that goes with it. And demand real regulation from the FCC and congress.
The world is changing quickly. Mr. McAdam, tear down this wall.
Posted by Anonymous | November 3, 2007 - 5:11pm
Verizon has a long history of taking a good phone and disabling any and all features that don't add to their bottom line. I brought this up with a Verizon talking head and she said it was to protect their network from hackers/viruses. I told her that the first time a cellphone provided anything other than voice connectivity it became a computer and they became an ISP the same as any other ISP out there. I have a computer and an ISP and I get to choose where I go and what I download. It should be no different with a phone that I purchase from Verizon if the phone had that capability from the manufacturer. She of course came back with the Verizon company line. This will always be Verizon's look on this. They want you to continue to pay through the nose for content. Very very sad.
Posted by Anonymous | November 20, 2007 - 8:46pm
Verizon gets a Negative 10 for customer service. their reps are rude, incompetent, sarcastic and unethical. They will add services and/or extend your contract despite your refusal to accept features just to boost their numbers. Calls for support result in rude interuptions and no support. Requests for supervisors are denied. The customer is always wrong and bothering the personnel receiving paychecks through customers' payments. Terrible. I am taking all company phones away from Verizon. We cannot run a business and spend all this time attempting to deal with these untrained, phone company wanna-bes.
Posted by Anonymous | November 20, 2007 - 8:49pm
If Verizon has the best network, why are so many of my Verizon calls dropped? Hey! How do you sleep at night knowing that you are wasting my payments to you when you get your Verizon paycheck when you should know it would be better spent on my sick adopted children? Instead of providing customer support, you're on line pretending to be a customer and attempting to defend poor Verizon service. GET TO WORK!
Posted by Anonymous | November 29, 2007 - 10:53am
What a great interview. I'm glad to see that vzw is more concerned about providing the best service out there. Good response on the iphone.
Posted by Anonymous | January 11, 2008 - 9:08pm
Verizon is definitely the best out there and if you think you drop a lot of calls, try T-Mobile or someone and you'll see the difference. As for Cingular's (now AT&T) claim that they have the fewest dropped calls that may be true, but half the time you have no service, or you get a bad connection and you definetly can't use the crap in a building.......Verizon Wireless leads the way. Still much to improve, especially in the area of disabling phones built in features. Overall a very informative interview.
Posted by Sick Of It All | January 23, 2008 - 5:23am
@ Anonymous
"Verizon gets a Negative 10 for customer service. their reps are rude, incompetent, sarcastic and unethical"
That's exactly how we're trained to be to customers. They don't mean to train us to be that way, but when they assimilate us into the Verizon machine they teach us customer service basics. Once on the job, we're taught to give the customer everything they want that is well within the manufacturer warranty or the realm of profitability for Verizon. Well within the first three months of being an employee (a direct store, mind you, where they have customer service, sales and technical supports reps), whenever a manager is involved in a customer/employee dispute, we are contradicted in every possible way which makes us seem incompetent. It looks like we don't know what we're talking about because we are giving you educated responses from our numerous training classes and online training classes required to maintain our employment.
We keep servicing people that come in with problems in relation to their bills, their equipment or their service and when we get treated like a kid with down syndrome for the umpteenth time in front of a customer, that makes us sarcastic. We are expected to keep a smile on our faces, pretend that the equipment/technology we sell is the second coming of Christ, deny any problems or failures or design flaws with phones or service (the LG Chocolate 8500, KRZR + RAZR) and keep promoting said products all while asking people to fill out pointless surveys online to promote our services so our bosses can keep getting bonuses that us peons won't ever see a dime of. That makes us feel like second class citizens, the betas to the alphas, the toaster to the microwave. That sometimes can make us rude.
So the next time you are in a Verizon Wireless direct store and you don't get the service you expect (someone kissing your ass and massaging your feet, I guess), please forgive us if we don't have the fortitude to fulfill your dreams of being hoisted onto our shoulders and chanting your name as the best customer ever. We work hard to serve you (sometimes) ungrateful people. It's not our fault that our customers have water/liquid damaged phones with no insurance, don't know how to update your service PRL's with a simple call to *228 to stop bad connectivity, or don't know how to manage their kids and prevent them from downloading thousands of ringtones, games and/or applications that shoot your bills sky high. We are there to pick up the pieces when you abuse your phones, service and customer service reps just because you don't know how to use the internet and need someone to blame. We service you with the best attitude we can muster because even when some of you come in with an easy fix ("my phone won't turn on", "I can't find my ringtones", "my phone won't charge"), we know that at the end of the day, if we as employees were as clueless as some of you seem to be, we would want someone to be compassionate towards us. We know that because you come in, you spend money on the Verizon Machine that enslaves us as employees and as customers alike which gives us a common bond and also a paycheck every other week. We appreciate that you spend your hard earned money on the services we tout as the "most reliable" in our business and for that we appreciate your dedication. But when you come in with your attitudes or leave with one because we didn't bend over backwards for the hundredth time that day (especially when some of you don't deserve it), we can't help but feel a little antipathetic towards customers like that. I guess that might make us seem unethical.
@Anonymous
"If Verizon has the best network, why are so many of my Verizon calls dropped?"
Have you ever asked someone at Verizon how to fix that problem? Even our greeters have had customers leave the store with a resolution to that problem without them having to wait for a technician to tell them the same thing. Just dial *228, press send and wait for the prerecorded message to prompt you to press one of two buttons. Press one for local programming which gives you the best connection to surrounding cell towers in your area. If it still does not resolve your problem, check the website for a map of service in your area. If you really need assitance, you don't have to drive to your local store for help. You can dial 1-800-493-1625 for Tier II Technical Support. They can troubleshoot your service, your phone and even have a technician sent out to your cell site should you choose to file a service ticket with resolutions within 48 hours.
"Hey! How do you sleep at night knowing that you are wasting my payments to you when you get your Verizon paycheck when you should know it would be better spent on my sick adopted children?"
See, this is the attitude I am talking about in my long rant above. It's a simple solution, sir or madam: If Verizon is preventing your sick adopted children from getting the nourishment or care that they require, maybe you should cancel your contract. Either that or you can do a google search and find out from numerous forums that deal specifically with the problems you are facing. It took me a total of thirty minutes to figure out how to circumvent the DRM on Verizon phones so I could create my own ringtones, download the program necessary to do so, and also make my first custom ringtone work on my Verizon phone.
"Instead of providing customer support, you're on line pretending to be a customer and attempting to defend poor Verizon service. GET TO WORK!"
I will not attempt to defend Verizon service. Sometimes it is nonexistent (depends on what area you live in), sometimes the service has hiccups. I am simply defending the employees aka the flesh and blood people I work with from customers like you that feel like we should fan them while feeding them grapes. That is not a reality of retail business, sir or madam, and if you'd ever gotten that kind of service from another cellular provider, I suggest you sign a service contract with them if you have the opportunity to do so.
We do have lazy employees at our stores. There are lazy employees everywhere in every business no matter what gender, nationality, or disposition. Don't act like this is some kind of surprise that someone didn't treat you the way you expected to be treated. I always expect my customers to treat me with a certain amount of respect and when I don't receive it, guess what, I don't log onto the first forum I can find and complain about customers and the level of disrespect. I shake it off before I assist the next customer because I refuse to be a part of the circle of negativity. If I have a bad day, I don't take it out on my customers or my co-workers, I take a break, a breather or find some way to find some control over my emotions and my good mood so I may give the best I've got to give to people in my life.
In closing, sometimes you receive poor customer service because you came in with an attitude or a holier-than-thou, the-customer-is-always-right mentality. Sometimes you receive that poor service because you fail to acknowledge your faults or negligence and become combative when corrected. Sometimes, the poor service you may receive doesn't mean that the whole company is "unethical", it just means that we can only put up with so much from our customers until we start to show a little crack in the facade we put on every day. Sometimes you deserve it. Just a little perspective from our side of the counter.
Posted by Just a Customer | January 24, 2008 - 2:57pm
Sick of it all,
Your rant is proof of the customer service problem at Verizon Wireless. While you have valid points, they are irrelevant. No customer is “really†personally attacking you. This is business. As the face of VZW, you are paid to deal with these situations with a smile on your face. This is why so many large businesses have customer service issues. It is never personal and as soon as you make it personal the customer suffers.
Clearly you are in the wrong profession and clearly, for you to have these beliefs and still be employed by VZW, your training is/was atrocious, your managers do not know how to manage properly and they certainly do not care about you. “The customer is always right†is a very powerful statement that many companies have unfortunately forgotten about. But it starts with the company caring about their employees.
T-Mobile might not have the largest network, but their customer service is second to none. While I am a VZW customer (because of coverage), I am jealous of the service T-Mobile customers receive. VZW could build fanatical loyalty through outstanding customer service. It is too bad no one at VZW seems to realize that.
Posted by adoptive parent | February 20, 2008 - 11:35pm
Funny you mentioned adoptited children. I dont think Verizon cares about our adopted children. Have you seen the commercial the implies a brother is adopted and that is a NEGATIVE.
I will be dropping my verizon home srvice and soon will drop wireless if they dont remove this commercial.
Posted by Anonymous | March 14, 2008 - 7:28pm
we switched to verizon from comcast due to price. we are sorry we did it. Verizon customer service, tech support and follow up is a farce. Verizon is the farthest thing from customer intimacy. Fios internet...thumbs up, telephone....we would rather eat my dogs food!
Posted by Morrill Beckman | March 14, 2008 - 7:37pm
I only wish Lowell McAdams would take a few moments out of his Hart Shaffner Marx life and look at the real gut of what people are saying about verizon. Not just the fed up ones....but the everyday ones that get terrible service. Customer Intimacy is the only way to go....along with the multi billion $ networks. Yes its impressive, however.....when it comes right down to it the networks mean nothing when it comes to TAKING CARE OF CUSTOMERS!!!
Mr CEO.....why don't YOU put some jeans on and go into the field? Talk with existing cutomers. One that JUST came aboard, and ones that have been with you for a while, and ones that have left. Get the REAL picture. Get YOUR VERIZON employees' names that are pushing potentially LOYAL customers away!
Posted by Anonymous | March 18, 2008 - 8:02pm
To All:
Lowell McAdam is actually a great guy doing great things for a great company as well as doing great things for the entire wireless industry. If you ever get the opportunity to meet this guy, you need to talk to him. He speaks with power.
Not everyone gets the answer they always want to hear when speaking to a customer representative. Some have negative and some have positive experiences. As you read these silly annoying negative comments, you should just laugh. Remember you always hear the negative side of the story, no one ever heavily boasts about their positive experience.
Although I am sorry to hear that some of you have had a negative experience in the past, just remember that wasn't a personal attack on you.
Posted by Cynthia A. Fiala | April 3, 2008 - 2:46pm
Could you please tell me how I can contact Mr Lowell McAdam?
Posted by Anonymous | April 3, 2008 - 5:48pm
Cynthia-
Why not try his name in various ways @verizonwireless.com
Posted by Anonymous | July 10, 2008 - 3:03pm
I received a text from verizon saying that I qualify for one month free and there wasnt an expiration date. When I called in to accept the offer there reply was...sorry, we are no longer extending that offer...it expired. NICE!! What kind of company is this?? Is that even legal??
