Verizon hints at LTE-only phones in 2014 to lower subsidies

Verizon Wireless' shift to voice over LTE may ultimately usher in fundamental changes in the carrier's handsets and sales strategies.

Verizon, which revealed plans late last year to launch voice over LTE services by early 2014, could begin selling LTE-only phones as early as next year, Verizon CFO Fran Shammo said today at Deutsche Bank's Media, Internet, and Telecom conference. Shammo said the transition to "pure LTE" handsets -- handsets that lack CDMA chips -- would result in lower costs and subsidies for customers.

"We will ultimately get to voice over LTE, probably end of this year, beginning of next year," he said in response to an analyst's question, according to a transcript published by Verizon (PDF). "Then if you look out into late 2014 then you start to think of things like, OK, so now I can start to take the CDMA chip out of the phone and just have a pure LTE handset. That also starts to reduce subsidies. So over the next two to three years I think we will start to see subsidies come down."

A major stumbling block to that vision, however, is that LTE is still largely in its infancy. Before Verizon can begin to offer a "pure LTE" handset on a wide scale, the carrier would first need to ensure that its LTE coverage is as ubiquitous as 2G and 3G coverage. A little more than two years after Verizon launched LTE, it began 2013 with a presence in 473 markets, which it says is roughly 89 percent of its 3G coverage.

Voice over LTE, or VoLTE, moves transmission of voice traffic off networks designed primarily for voice and toward a more efficient data-centric network. The voice call is broken into data bits and transmitted in much the same way an e-mail moves across the Internet, allowing for clearer calls and other services that can be linked to it.

Shammo's comments come as the industry appears to be shifting away from the subsidy model, in which consumers agree to a two-year contract in exchange for inexpensive upfront fees for the handset. Verizon rival T-Mobile is rumored to be moving to a no-contract model this month and eliminate subsidies on handsets this year.

Noting that the iPhone 4 "produced a lot of volume" for Verizon in the fourth quarter, Shammo also said the company sees no need to offer commissions to salespeople to push the low-end handsets over the free iPhone.

"The worst thing that can happen for us is for me to incent a salesperson to get you into a phone that you walk out the door with thinking you are going to like and in three days you come back because you don't like it," he said. "Therefore, now I've just subsidized two smartphones because that phone you used I can't resell as a new phone."