administrative expenses are in here. The more customer Verizon has, the more support they need. In addition, another variable cost would be commissions costs for sales and parts costs for equipment. Together the variable and fixed costs make up the total cost of 5G for Verizon.
Fixed and Variable Cost of 5G Variable Costs Costs in Billions Fixed Costs Costs in Billions support $13 Research and Development $5 Commision $6.5 Network $10 Building $1.8 Licensing $8.8 While 5G is new technology, accessing the internet is not. Currently, consumers pay about $80 per line for their cell phones bill and broadband for home costs about $80/month as well. Currently sprint and AT&T are the biggest competitors with mobile services starting at $40 and $50 respectively and Comcast is the biggest competitors of home internet services averaging $100/month (Fowler, 2018). Sprint has limited coverage, as well as a less reliable network and therefore can not charge the premium prices that AT&T and Verizon charge. On the flip side, AT&T currently provides bundles to their customers with cellular and home services (including direct TV) for slightly higher prices but with additional built in features, such as on the go streaming. Finally, Comcast offers home services which include TV and internet and have just recently begun offering mobile options through a open WiFi network of customers. While each
of these services differs slightly, both in what they offer and cost, none compare with 5G capability in the future. Being connected to the world around us is important in today’s society. The internet is essential to innovation, jobs, entertainment and global competitiveness. Because of this, people are willing to pay for this service. If Verizon offered competitive pricing for their 5G home internet service, or if they bundled their home and mobile internet services, they could have success. Verizon could either offer penetration pricing or premium pricing depending on what route they want to take, either could be appropriate. Verizon could offer a family of 4 home and mobile services for $250 and remain competitive (penetration pricing). This would put their pricing just below the average of competitors pricing and make them extremely marketable. On the other hand, the fact that Verizon would be offering 5G mobile speeds means that they could offer premium pricing, especially if they were the only ones within the market with the technology. Verizon also has a strong reputation for social responsibility as seen in their support of education, hopeline, military and veterans, and first responders, an important consideration for many conscientious consumers. Verizon also has said they will not change their practices surrounding net neutrality, a hot topic and ethical issue for some consumers. In addition, the simple fact that Verizon is a reputable company offering a new technology may be enough to make people change providers even with premium pricing. Many consumers within the target demographic are willing and able to pay more for a product that aligns with their preferences and ideas surrounding social responsibility. As data consumption continues to increase those
- Fall '16
- Wi-Fi, Broadband Internet access, Verizon Communications