Verizon's McAdam dismisses unlimited data plans: 'You will run out of gas'

Verizon Wireless (NYSE:VZ) believes that competitors like Sprint (NYSE:S), which offers unlimited data plans to customers for the life of their phone line, will eventually have difficulty maintaining that promise to customers.

Speaking at the Goldman Sachs 22nd Annual Communacopia Conference today, Verizon Communications Chairman and CEO Lowell McAdam said that with traffic on the networks steadily increasing there is going to be a point where operators hit a ceiling in terms of available bandwidth. "If you are allowing unlimited, you will run out of gas. It's physics," he said.

McAdam also said that he believes Verizon, which has always used network quality to differentiate itself from its competitors, will continue to lead on that front. Specifically, he said that 4G is not the end of the lifecycle of the network and he hinted that 5G is coming. "5G is video," he said, adding that there is still a lot of room for growth on the 4G network. "We have 35 percent of our customers on LTE and 60 percent of the traffic is on 4G. But we still see opportunity on the network." 

When asked about the business model for video, McAdam said that while there is demand for a model in which the content providers pay for their content to be distributed over the wireless network, he said that he thinks it will be at least two years before that model actually becomes a reality in the marketplace.

Nevertheless, he touted the company's plans to demonstrate LTE Broadcast technology during the 2014 Super Bowl. He said that, thanks to LTE broadcast technology and the advances in video compression technology, he expects there to be a dramatic shift in mobile video delivery in the next 12 months. "Mobile could be incremental to the broadcast networks," he said. "Because we have FiOS and mobile, we are not seen as a disrupter but as a partner."  

McAdam also dismissed the notion of Verizon merging or acquiring other operators in the United States, noting that his company doesn't need to consolidate. "We have a footprint we like. We have assets we like and we will press that advantage," he said, adding that he believes the FCC wants to see four Tier 1 competitors in the U.S. market for now. However, he didn't rule out possible consolidation among smaller, regional operators. "There are still regional players that could be consolidated," he noted.

When asked about Verizon's recent decision to purchase the 45 percent of Verizon Wireless that Vodafone owned for $130 billion, he said that it was a journey that had been in the works for about a decade but that finally the timing was right. He said that he expects the deal to close in the first quarter and to face no hurdles from regulators or shareholders. "We own the asset and control the asset. We are taking foreign ownership out of the equation so we don't expect any issues," he said.

For more:
- see this transcript

Related articles:
Sprint guarantees unlimited data for life
Sprint's Hesse: Verizon/Vodafone deal was inevitable
Verizon exec: 2014 is 'definite' for launch of LTE Broadcast service
Ericsson's Wibergh on solving network congestion and the promise of LTE Broadcast
Verizon not the only carrier eyeing LTE Broadcast

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