Verizon Communications can generate hundreds of millions of dollars of revenue in coming years from wireless services beyond the mobile phone, in areas ranging from healthcare and automobiles to energy management, its top executive said Monday.
The No. 1 U.S. mobile carrier joins other companies expected to debate and demonstrate the benefits of connecting devices like cars to the Internet at this year's Consumer Electronics Show in Las Vegas. Operators like Verizon consider this an important new business.
"It's safe to say this is a market potential of billions in the 2020 timeframe," Lowell McAdam told Reuters in an interview. This should translate into a market with "hundreds of millions of dollars in revenue for a company the size of us."
"People will be really surprised at what we're able to do," he said. "The power of the networks is finally going to be able to provide these sort of things."
"In 2013 and 2014 you're going to begin to see that," the executive said.
Taking wireless access beyond the mobile device is expected to become a major theme at this year's CES. For example, wireless connections can allow doctors to remotely diagnose an illness and direct a pharmacist to administer medication, he said.
McAdam, who turns 59 this year, also talked about public safety improvements from wireless such as the ability for firefighters to navigate a burning building with an infrared camera that has wireless access to the lay-out of the building.
In a wide-ranging interview on the sidelines of the world's largest technology showcase, the CEO also talked about potential shifts in the industry in coming years.
McAdam is open to eliminating subsidies on mobile phones that sharply reduce the cost of devices to consumers, but said buyers now preferred paying less in exchange for longer-term wireless contracts.
Smaller rival T-Mobile USA, a unit of Deutsche Telekom, has announced a plan to get rid of device subsidies this year but McAdam said it is not clear this would work for Verizon and the rest of the U.S. market.
U.S. operators like AT&T Inc and Verizon typically pay handset makers like Apple Inc hundreds of dollars for every phone, so they can offer discounts to customers that in turn commit to more lucrative service contracts.
"It's very intriguing. Every carrier has thought about doing away with subsidies," he said. But "I don't think U.S. consumers are ready to buy an iPhone for $700."
McAdam also urged the Federal Communications Commission to approve several industry mergers and acquisitions in the pipeline that telecoms observers say have the potential to help transform the current market landscape.
T-Mobile USA is seeking approval to merge with smaller rival MetroPCS Communications Inc. Sprint Nextel is also looking for the nod to sell a 70 percent stake to Japan's Softbank Corp.
Some analysts say such combinations could pressure bigger players such as Verizon Wireless, as they face stronger rivals with the ability to compete more aggressively. But McAdam urged U.S. regulators to approve the deals.
"Three to four strong carriers are a lot better for the market than a couple of weak ones that are struggling to stay afloat and do dumb things," said McAdam, referring to the potential for promotions that could ignite a price war.
Since McAdam became Verizon CEO, Verizon Wireless - Verizon's joint venture with Vodafone - itself gained regulatory approval for a purchase of about $3.9 billion of wireless spectrum from cable companies.
(Reporting By Sinead Carew; Editing by Bernard Orr)
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