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Verizon CEO: Unlimited data plans just aren't sustainable

"If you allow unlimited usage, you just run out of gas," says Verizon chief Lowell McAdam. Oh, and don't go looking for a price war anytime soon.

Verizon CEO Lowell McAdam

Verizon CEO Lowell McAdam believes there's a shelf life on unlimited data plans.

As the wireless world moves toward delivering more video and becomes the center of communication, unlimited offerings aren't sustainable, McAdam said on Tuesday during an investor conference.

"With unlimited, it's the physics that breaks it," he said. "If you allow unlimited usage, you just run out of gas."

Verizon last year shed its unlimited data offering, instead opting for a tiered pricing model and family data plans that offer customers a bucket of data. The plans stand in contrast to unlimited data offered by smaller rivals Sprint and T-Mobile, both of which have shown a willingness to get aggressive with price and features. Sprint has even offered to guarantee its unlimited data for life.

Verizon Wireless, which has long enjoyed a reputation for network reliability, wouldn't stoop to that level, McAdam said.

"We never have and never will lead on price," he said, adding he doesn't believe that the recent moves by the smaller carriers will spark a price war.

On unlimited plans, he said he believes the rise of bandwidth-hogging video will make it difficult for carriers to maintain an unlimited plan because spectrum needed to carry those signals are limited. He noted that the move to 5G wireless technology will be all about video.

McAdam touted his network superiority over his rivals, noting that his LTE deployment is about a year ahead of its main rival (AT&T), and three to four years ahead of its smaller competitors (T-Mobile and Sprint).

"We've got footprint we like," he said. "We're going to press that advantage."

While McAdam talks up the network, AT&T has narrowed the gap on reliability. A Nielsen study found AT&T, and not Verizon, the most reliable. Early results from a Root Metrics study had AT&T close behind Verizon.

McAdam talked about the "friction" he has put into the process of upgrading a smartphone, which makes it tougher for a customer to get a new device, which he said helped the company's bottom line. The introduction of Verizon Edge, a monthly installment and early upgrade program, also helped cut into its device cost.

The program, however, has been criticized as a poor deal because it requires customers to pay the full cost of the device and service plan, compared to the discounts that T-Mobile and Sprint offer on their service plans.

Ultimately, if a carrier has the smartphones people want, it'll create a "virtuous cycle" where customers stick around.

McAdam also talked a bit about decreasing the cost of subsidies paid out and commented on the general landscape of the handset manufacturing industry. He said he hoped BlackBerry's deal to go private will give it a boost and he was optimistic that Microsoft's acquisition of Nokia would yield devices with quality hardware and software.

While he encouraged an environment with three or four different mobile operating systems, he said the control that Apple and Google's Android have on smartphones doesn't represent a cornered market. He noted that within Android, there's still competition because different companies such as Samsung, LG, or HTC still compete.