Verizon Wireless is a company that operates within the telecommunications and technology industry. Regardless of the current economic condition, Verizon Wireless, a joint venture of Verizon Communication and Vodafone, has had a continued rise in subscribers since 2001. Some of the macroeconomic variables that may affect the industry as a whole are unemployment/employment, personal disposable income, inflation and the stock market. Each of these variables has an influence in the future of the telecommunications industry.
Verizon Wireless, just like its competition, is constantly changing. They are adapting to the new technologies that develop and the demands of their customers as soon as they can. Although the unemployment rate has fluctuated between 6% and 4.5% from 2003 to 2007 (U.S. Department of Labor, n.d.) there were periods that were higher but did not influence the rise in subscribers to Verizon Wireless. In the below graph, it illustrates how Verizon Wireless still had an increase in subscribers although there were times when unemployment reached a high of 6 %.
According to the graph, from 2001 to 2007 the number of people who subscribed to Verizon Wireless increased from 29.4 million in 2001 to 65.7 million in 2007. During this time the unemployment rate reached a peak of 6 % and a low of 4.6% which did not hinder Verizon Wireless from attaining new subscribers.
Disposable income “is personal income less personal taxes,” (McConnell & Brue, 2006, p.121) which people can use as they choose by either spending or saving. The Economist Intelligence Unit Limited (2009) Web site has personal disposable income rising in conjunction with the median income going up according to the U.S. Census Bureau. The graph below shows the average disposable income and average income rising over the same period as subscribers and unemployment rates. While incomes are increasing people are choosing to limit their bills by switching from wired phone lines and wireless to wireless only.
“The mega-trends in telecommunications - the shifts from analog to digital technology, from wired to wireless platforms, and from narrowband to broadband services – have fundamentally changed the way people communicate.” (Verizon Communications, 2008). A change in how many people have wireless only service has helped Verizon Wireless increase their subscribers. By the end of 2008 one in five American households may well not have a home phone line according to a The Nielsen Company (2008). “At the end of 2007, 16.3 percent of U.S. households had abandoned their landline phone for their wireless phone, but by the end of June 2008, just 6 months later, that number had increased to 17.1 percent,” (The Nielsen Company, 2008).
Although incomes have been rising, consumers are going wireless only. In the graph below it compares households that have both landline and wireless, only landline and only wireless. The trend to go wireless has been growing at a very fast pace. It jumped from 3.2% to 13.6% in five years and is projected to jump to 20% by 2012 according to Verizon Communications (2008).
The telecommunications industry has many opportunities to expand their business as technology changes everyday. By developing new ways to connect to people, the challenges of marketing to customers and keeping them have also evolved. Verizon Wireless has used to its advantage that “49% of Americans are starting to see cell phones as a necessity,” (Morin & Taylor, 2009). Many of the plans offered include long-distance so there is a cutback in costs to keep in contact with friends and family out of the local area. Another attraction Verizon Wireless offers are the new phones that come out constantly and with those come contracts. This will continuously create profits for the determined amount of time plus the cost of the new phones.
Research costs into new phones, software, marketing and customer service can initially be high but projected sales, demand for carrier specific items and keeping loyal customers more than makes up for the initial cost. All these challenges help stimulate the economy by training people, increasing sales there fore increasing profit that can be redistributed.
Competition is a challenge that all wireless companies face. In 2003, under a program called Local Number Portability, wireless customers were able to change carriers and keep their existing wireless phone numbers. Verizon Wireless has faced this battled by providing one of the most reliable networks in the United States and by providing broadband network capabilities. All these new services and maintenance to the network needs to be supported by employing more workers which helps reduce the unemployment rate. Verizon Wireless can contribute to the economy by employing people and by providing consumers what they want at a reasonable price.
Although the unemployment rate has varied, Verizon Wireless customers have increased at a steady rate. Part of this could be the increase in disposable income or the move to go from a wired-line to a wireless line. Many macroeconomic variables like unemployment, disposable income, inflation and stock market have an affect on the telecommunication industry. Competition and technology are some of the challenges faced by Verizon Wireless. There are several ways for them to combat this by providing a superior product, many options and a reliable network. The more the company needs to rise to the challenge of competition, the more employees will be needed to meet this challenge.
References
DeNavas-Walt, C., Proctor, B.D. & Smith, J.C. (2008). Income, Poverty, and Health Insurance Coverage in the United States: 2007. US Census Bureau. Retrieved July 31, 2009, from http://www.census.gov/prod/2008pubs/p60-235.pdf
The Economist Intelligence Unit Limited. (2009). Data Tool. Retrieved August 2, 2009, from http://data.eiu.com/EIUTableView.aspx/personal_disposable_income
McConnell, C.R. & Brue, S.L. (2005). Economics. Principles, problems, and policies (16th Ed). New York: The McGraw-Hill Companies.
Morin, R. (2009). Luxury or Necessity? The Public Makes a U-Turn. Pew Research Center. Retrieved August 1, 2009, from http://pewsocialtrends.org/pubs/733/luxury-necessity-recession-era-reevaluations
The Nielsen Company. (2008). Call My Cell: Wireless substitution in the United States. Retrieved August 2, 2009, from http://www.nielsenmobile.com/documents/WirelessSubstitution.pdf
United States Department of Labor. (n.d.). Household Data Annual Averages. Retrieved August 1, 2009, from ftp://ftp.bls.gov/pub/special.requests/lf/aat1.txt
Verizon Communications. (2008). . Retrieved August 1, 2009, from http://investor.verizon.com/profile/industry/.
Wong, Wailin. (2008). USA telecoms: Cellphones to ring up sales even in time of recession. ViewsWire. Retrieved August 1, 2009, from http://viewswire.eiu.com/article1483133133.html?pubtypeId=1162462501&text=cell%20phones
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