Verizon Wireless Tells 'Price Sensitive' Customers It Doesn't Want Them, Declares It Doesn't Need To Truly Compete

from the nah-nah-I-can't-hear-you dept

Mon, May 11th 2015 8:09am — Karl Bode

We've noted how AT&T and Verizon investors and executives have been terrified for some time that they would have to (gasp) compete on price as T-Mobile continues to disrupt the market with its consumer-friendly, faux-punk rock behavior. Ever since the AT&T deal was blocked by regulators, T-Mobile has been mercilessly (but entertainingly) mocking both companies, offering a bevy of promotions while eliminating a lot of "pain points" for consumers (like overage fees). It's working: T-Mobile's now signing up more subscribers each quarter than Sprint, AT&T or Verizon -- just by treating consumers well.

So far, outside of a few very time-limited promotions, Verizon's been unwilling to compete on price, insisting the company's high prices are justified by a "premium network experience." Verizon also recently tried to shoot down the appeal of T-Mobile's unlimited data offerings by insisting that nobody really wants unlimited data plans, they're just being driven by "gut feelings." With T-Mobile just having one of its most successful quarters ever, Verizon's increasingly under pressure to compete on price, yet the telco continues to proclaim it doesn't have to:

The company reported on Tuesday that it had lost 138,000 postpaid customers in the last three months. Francis Shammo, Verizon’s chief financial officer, apparently won't be missing customers who, he says, value price over quality. "If the customer who is just price-sensitive and does not care about the quality of the network—or is sufficient with just paying a lower price—that’s probably the customer we’re not going to be able to keep," he said in the company’s quarterly earnings call."

It shows you just what kind of competition Verizon's historically used to if the company honestly believes you have a choice of when you get to compete on price. And while the company is busy telling investors that it's not feeling any heat from T-Mobile, the growing, magenta-hued (TM) threat has Verizon simultaneously testing a number of new price promotions it hopes will help tip the subscriber scales back in its favor. Smelling blood, T-Mobile this week launched a new promotion that specifically takes aim at these "price sensitive" customers Verizon apparently doesn't want any more:

1/ #NeverSettle for @VerizonWireless’ ridiculous, costly, slower-than-@TMobile LTE network! Higher price does not equal faster network.
— John Legere (@JohnLegere) May 5, 2015

Of course Verizon's not entirely wrong. The company does come in first place pretty consistently in most customer service and network performance studies. Verizon's also well aware it enjoys an 80+% retail market share with AT&T, and an 85% market share of the special access (cell tower backhaul) market. The two companies also enjoy an estimated $171 billion in combined spectrum holdings, which certainly helps keep other competitors from market. Still, this belief that the company doesn't have to compete on price in the face of increased price competition seems like a pipe dream narrative they'll only be able to push for so long, especially if Sprint can manage to get out of its own way, fix its lagging network, and become a viable fourth wireless competitor.

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Filed Under: competition, mobile phones, price sensitive, pricing, value shopping
Companies: at&t, sprint, t-mobile, verizon, verizon wireless

46 Comments

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Anonymous Coward, 11 May 2015 @ 8:17am

How much has Sprint built out its network since the Softbank acquisition?
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Anonymous Coward, 11 May 2015 @ 8:19am

I care about unlimited data which is why I still have unlimited data. And the moment I lose that unlimited data is the moment Verizon loses me as a customer. It is literally the only thing keeping me tethered to the company. I don't care how good their network is if I'm crippled when using it.
And it's not a gut-reaction either. It's logical thinking. I don't always use a lot of data, but when I do I don't want to pay outrageous overage fees. I'd rather have it and not need it than not have it and suddenly need it.
It's also a statement against the carrier. This wireless data war is the same one waged against home internet in the past, just replace megabytes with minutes. The customers won that battle and they're going to win this one too.
Lastly, when you have something good and take it away to replace with something less good, that's the opposite of progress and advancement. That's regression and for them to claim it's better for people is hollow.
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CK20XX (profile), 11 May 2015 @ 8:22am

I live in rural Washington state on the Olympic peninsula, where my T-Mobile coverage just isn't enough. Unless I'm near a major city like Sequim or Port Townsend, I can't get any cellphone reception at all. People tell me that switching to Verizon would fix that, but... they're just so relentlessly evil... and I'm not convinced that any contract I'd get with them wouldn't have more than a few lies in it. So I'm stuck.
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Anonymous Coward, 11 May 2015 @ 8:34am

Re:
Something that may help is T-mobile supports WiFi calling. I don't think any other cell company currently supports that. I have been impressed and plan to switch because of it. If you configure your phone to make WiFi calls you can boast some areas of reception that have wifi. I have seen it work on connections as low as 3 Mbps DSL.
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Anonymous Anonymous Coward, 11 May 2015 @ 8:50am

Fan Letter
Dear Verizon,

I used to be a Verizon customer, but now I am a T-Mobile customer. Can ya hear me now?

Former Customer
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Anonymous Coward, 11 May 2015 @ 8:59am

Re:
I'm in a similar boat. My gut feeling is that if I lose unlimited data I will change how I use my phone and data connection, probably by switching to another carrier. They have been smoking something good if they think I will pay per GB pricing for the 20-30 GB of data I use per month.
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Ninja (profile), 11 May 2015 @ 9:02am

Re: Fan Letter
Dear Customer,

We can't hear you from the top of our Govt induced, regulatorily captured monopoly.

Please fuck off.

Your former carrier
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John, 11 May 2015 @ 9:17am

Premium network... yeah right
I live in the Houston area (northern suburb) and the Verizon service is horrible. LTE is many times not even available due to poor signal. I was only 5 miles from my home yesterday and I was lucky to get a single bar and 1x on the data side. This isn't a hilly area it's mostly flat. This is just Verizon not caring about their customers.
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Designerfx (profile), 11 May 2015 @ 9:20am

hahahahaha
"price over quality"

What they mean is the other way around.

Unlimited data is the only thing that reflects on their quality.
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Anonymous Coward, 11 May 2015 @ 9:29am

Shammo is both right and wrong
I'm in the wholesale construction business so I understand where Shammo is coming from when he says, "If the customer who is just price-sensitive and does not care about the quality ... that’s probably the customer we’re not going to be able to keep."

I have the same attitude as my facility. If all you want is the cheapest price possible for this valve, go to Amazon. But if you want the 20 years of professional experience that I bring to the table as well as free troubleshooting, training, technical support, engineering and easy warranty replacements, spend a few more bucks and buy it from me. Yeah, I sell parts, but I sell service more than anything else.

Although if I'm in Shammo's position, I'm not certain that type of attitude would be immensely successful. Wireless service is so ubiquitous that it might as well be water. I don't need engineering or warranty support with water, either it works when I open the tap or it doesn't.

These wireless carriers can claim all the speeds and coverages that they want. When you really take a step back, for most of us, all the major players are very similar in their product offering. In this type of marketplace, the only way to compete is through price and not making me rip my hair out when I do have to call you because of a billing error.

Look Verizon, if you REALLY want to break T-Mobile and keep your price where it's at, have 5,000 of your employees go get customer service jobs at T-Mobile and tell them to make life a living hell for anyone who calls in.
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Anonymous Coward, 11 May 2015 @ 9:54am

All those damned customers.
If you do not like our service, it is you who are wrong and stupid. We expect more from our slav... ahm valued customers. Like paying a very high price for very little service and connection without complaints.
Remember: peasants need internet too... but not too much.
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Anonymous Coward, 11 May 2015 @ 10:11am

Re: Re:
Actually Sprint does, at least on the Galaxy S5. Work has given me a S5 on Sprint and it supports the WiFi calling feature. Oddly enough Sprint's coverage is actually worse than T-Mobile's in Los Angeles. I can be driving along and hear the Sprint phone chime that it's lost data while my T-Mo S5 doesn't miss a beat.
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PRMan, 11 May 2015 @ 10:43am

Re:
Quite a bit. Around the time of the purchase, it quit working at my house at all. I had to get a (free from Sprint) AirRave femtocell in order to use the phone in my house at all.

About 6 months later, they installed another tower and we had the best phone service ever in our house. Also, internet was improving everywhere.

But service was going in the toilet. Sprint actually won best service for several years straight, but they crammed an extra line on my account and it took 5 phone calls, a threat to send me to collections, a call to the state PUC and a threat to call the FCC for it to get removed.

I switched to T-Mobile in a heartbeat once I heard they were doing Wi-Fi Calling and I pay less for 4 new phones on T-Mobile than 4 old phones on Sprint. Also, the internet seems faster overall and they sent me a free $200 Asus WiFi router for home use which is really powerful and covers my whole house.

So far, I'm happy with T-Mobile after having Sprint for over 13 years.
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PRMan, 11 May 2015 @ 10:48am

Re: Re: Re:
I've had both Sprint and T-Mobile in Southern California (mostly Orange County, but I make my way up to LA sometimes) and I have rarely dropped a call on either one (2-3 times a year at most). The internet on Sprint was poor at times (in certain places) and seems better on T-Mobile.
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PRMan, 11 May 2015 @ 10:50am

Re: Shammo is both right and wrong
But I've had GREAT customer service from T-Mobile and no network problems at all in Southern California. There was a problem on my bill (the store added insurance and extra data to my new phones without asking me) and they removed it with no hassle.

I could pay literally double for Verizon and get nothing in return.
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PRMan, 11 May 2015 @ 10:51am

Re: Re: Shammo is both right and wrong
Removed it and refunded me for last month.
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Derek Kerton (profile), 11 May 2015 @ 11:40am

Don't Agree
Karl, I fundamentally don't agree with your argument here.

Let's abstract it, and not talk about VZW and Tmo at all.

Businesses do NOT have to compete on price. Not at all. Apple doesn't, Faberge doesn't, Nike doesn't, LL Bean doesn't, etc.

You can compete on a number of qualities depending on the product. Yes, price will always play a role, but customers have proven that they will choose a higher priced product if other factors are considered superior. Quality, differentiation, new features, exclusivity, location, speed, service, cachet, brand, accessibility, privacy...these are all features that could affect the price consumers are willing to pay for a product.

Harvard's Michael Porter, a leading authority on competitive strategy and competitiveness, pretty much laid out my point in 1980:
https://en.wikipedia.org/wiki/Porter%27s_generic_strategies

He outlined three specific concepts for companies to succeed, only one of these was price. While I don't accept his argument as 100% law, his arguments are pretty useful to disabuse the notion that competition MUST always be on price.

Frankly, the entire economy would be a race to the bottom if it were so. There would be little differentiation, no innovation, and little quality if your hypothesis from this article were correct. It would be a sad, sad outcome.
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Ninja (profile), 11 May 2015 @ 11:50am

Re: Don't Agree
I think we are comparing apples to apples here. If I offer a 50 mbit connection and you offer the same there are very few ways to compete here. You can add perks to your offer to make it look more attractive or you can lower your price. People may choose to pay more if your service is better than the competition but otherwise it's pretty much a dead end. For me price is the main driver when I need a connection but if the service suffers too much I will go for a more expensive one.
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alternatives(), 11 May 2015 @ 11:53am

Re: Re:
I don't think any other cell company currently supports that.

Republic Wireless had it years ago.
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Karl Bode (profile), 11 May 2015 @ 12:30pm

Re: Don't Agree
Well one, I think telecom is fundamentally different from retail (Apple, Nike) in too many ways to list here.

Two, Verizon doesn't have to compete on price because of their domination of the special access market, which allows it control over the prices companies like Sprint and T-Mobile is charging. That just can't be ignored in suggesting they don't have to compete on price.

Three, I note at the end that I don't entirely disagree with Verizon's premise, give they really do have the best network coverage, performance, and customer service metrics. But what happens when T-Mobile and Sprint networks catch up? Last quarter showed they are now losing customers and the quality argument may not be enough.

Still though, I return to point two, and the fact Verizon enjoys regulatory capture and all but owns state legislatures. That tends to pollute free market analysis of their incentive toward real price competition.
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Anonymous Coward, 11 May 2015 @ 12:55pm

Quality Network
I'm sure my bits are way more shiny than the bits you T-Mo users are getting. :P
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Anonymous Coward, 11 May 2015 @ 3:04pm

I've been with T-Mobile since 2009. I've never gone over 3 gigs in a month, ever.

Until last month, when I used 6 gigs. And I have legacy unlimited, unthrottled data.

And I didn't pay a dime over what I intended, and I didn't get inconvenienced in the slightest.

And that's why I care about unlimited, unthrottled data.
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Coyne Tibbets (profile), 11 May 2015 @ 4:36pm

Simile? Or is it Allegory?
One day a large brontosaurus named Vinny went for a walk. A raptor named Tim came along and chewed off one of Vinny's legs. Vinny said, "I don't really want that leg anyway, all it did was complain I was too big and too heavy." The end.
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toyotabedzrock (profile), 12 May 2015 @ 2:45am

Imagine if the FCC could reallocate spectrum as it is needed instead of selling it as a fake private asset.
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toyotabedzrock (profile), 12 May 2015 @ 2:45am

Imagine if the FCC could reallocate spectrum as it is needed instead of selling it as a fake private asset.
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Logic, 12 May 2015 @ 4:31am

What happens when...
What happens if T Mobile ever managed to get a real customer base?

Firstly, they ignore almost all customers outside a large metropolitan area. I would have to drive nearly 40 minutes to get to a T Mobile signal above 2x on the west coast of Michigan.

Secondly, they claim most 4G bandwidth per customer. Because they have no customers (compared to Verizon and ATT). Does anyone really think they can sustain unlimited data with a real customer base, at the prices they charge? Of course not. They won't have the spectrum, they won't have the network infrastructure.
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Anonymous Coward, 12 May 2015 @ 5:21am

Re: Re:
Sprint offers Wi-Fi calling too...on Android and iOS.
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Anonymous Coward, 12 May 2015 @ 7:13am

Re: Re:
Sprint also offers WiFi calling, plus with their latest offerings, they can get you the most value out of any carrier out there. you should check them out.
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elgormiti (profile), 12 May 2015 @ 7:41am

Re: Re: Re:
Yeah, I was wondering when the RW fanboys were going to show up and serve up some green Kool-Aid. Give it a rest boys!

For those wondering, Republic Wireless is this small-fries operation trying to sell people on the idea of a wifi-first phone, and failing miserably at it.

With Google Hangouts, you can place FREE wifi calls all day long. Or, just download a few free wifi dialer apps and connect for free that way. Plus, Google Fi is going to set the standard on how the wifi thing is to be done. RW has been trying for almost four years and just can't get it right. Yeah, just read the past 30 days of complaints they have on their forums and you'll be running for the hills. RW is very much a frankenstein, pieced-together service that is not ready for prime time. Wayyyy too many problems.
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elgormiti (profile), 12 May 2015 @ 7:52am

Watch out Verizon and AT&T
With T-mobile and Sprint already pushing hard on the wi-fi alternative, and with Google Fi entering the fray, the top two dogs will have to eventually pay attention as they lose customers every quarter.

Savvy smartphone users are already using the built-in wifi antenna and options built into their phones to cut down on mobile data when on the move; and you DON'T need a wifi phone service or subscription to get that sweet, free wifi data connection or place wifi calls. Just use Google Hangouts or another freely downloadable wifi dialer app and 'boom', you're good to go.
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cinkuo, 12 May 2015 @ 8:47am

worst customer service
I have been a Verizon customer for many years. There was a recent fee on my bill that I was not aware about and I called customer service to have fees for 2 weeks removed from my account. The representative was not listening so I asked for a supervisor. Wow. That was worthless. Basically they would not remove a $20 fee for something stupid and I'm taking my business to T mobile.
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Anonymous Coward, 12 May 2015 @ 9:24am

Re: Re:
Sprint now offers WiFi calling for iPhones.
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jim, 12 May 2015 @ 10:58am

Re: Re:wifi calling
Sprint supports Wi-Fi calling. Just announced deal with Boingo for 30+ airports, hour home Wi-Fi network, and others will come.
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Derek Kerton (profile), 12 May 2015 @ 11:19am

Re: Re: Don't Agree
Ninja,

You're example is a fixed broadband. That is relatively commoditized, but this article is wireless. I'm not clear if we're on the same page or not. But there is more to wireless competition (and fixed) than just price.

Some key differentiators for wireless:
- network coverage footprint
- speeds across that footprint
- customer service quality
- customer service wait times
- retail, brick and mortar presence
- device availability, exclusivity
- Free included apps, or even better, lack of those apps
- Faster OS updates for Android phones
- SIM locking phones or not
- Offer subsidized model, or not with discount (like T-Mo)
- content exclusivity (VZW has NFL)
- international roaming inclusion
- wifi offload inclusion
- better, simpler billing
- better bundles, family plan
- integration with IoT
- etc, etc.

If a carrier got all the above right for me, I'd gladly pay them multiples of the cheapest offer. Heck, I pay AT&T about 3X for my AT&T lines versus what I pay Republic for my 1 line there. There's a reason.
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thejynxed (profile), 14 May 2015 @ 5:08am

Re: Watch out Verizon and AT&T
That doesn't work everywhere, unfortunately, especially now that more and more owners of devices with any sort of wifi hotspot capability are disabling it or otherwise locking third parties out of using their signal. Something to do with all of those fancy laws appearing that hold wifi providers accountable for shit like kiddie porn and pirated material that transfer over their network.
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MacMcG (profile), 14 May 2015 @ 5:14am

propaganda
Propaganda -- nothing more. All corporate decisions are made with great interest in user/customer population and prospects within that population. They're not dumb. If they believe cell phone coverage/performance is a hit-n-miss proposition and it doesn't matter if anyone signs up with any carrier - they'll all be disappointed (maybe not all, but the majority). Basically, the majority will switch eventually and the best propaganda will lure them.
Verizon Wireless is very good at propaganda (synonymous with advertising).

Mac

Maybe more later.
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Vlad, 7 Sep 2015 @ 2:30pm

Re: Fan Letter
No, not really. Your signal is kinda spotty.
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Vlad, 7 Sep 2015 @ 2:47pm

Re: Simile? Or is it Allegory?
The problem is Vinny was actually a TREX, so when Tim attempted to bite him, he was killed and eaten on the spot. Then Vinny was free to rule the land once again.

Moral of the story? Don't compares knives to guns. In certain areas under specific circumstances, it might not be relevant. But otherwise....
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Screw verizon, 10 Dec 2015 @ 4:43pm

Switched to straight talk and get exact same quality... Verizon doesn't own their towers. So I'm still getting exact same reception for under half the price :)
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Ruth, 29 Feb 2016 @ 5:03am

Verizon is not better
Sorry - My partner was constantly losing phone calls and his phone seemed to do what it wanted. He hated his phone and started to hate the service. We switched to another carrier at basically half the cost of Verizon and we love our new service. Verizon is not worth the much higher costs anymore. At one time they ruled the market and were much better which is why we were loyal customers for as long as we were; but not anymore.
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Frederick Hershman, 17 Mar 2016 @ 1:16pm

Re: Fan Letter
I also WAS a Verizon customer, but now I am a T-Mobile customer. It cost me over 1400 to get out of the contract for me and my 3 kids. The Best 1400 I ever spent. Verizon can rot. I don't have time here to say ALL the vicious things I should. No Company in my 60 year life has ever made me so angry.
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Zayah V, 23 Mar 2016 @ 8:08am

Apple wanabe's
They are trying to be like apple who charge an arm and a leg for a phone. The problem with that is that I don't need 20 megabyte per second downloads to stream HD content or browse the web faster or make twitter and facebook load content faster. You don't even need half of that and for downloading full HD videos to your phone or tablet you would do that on wifi as you would blow a whole in their pitifully low data plans and have a $1,000 bill. Also there is free wifi mostly everywhere unless you live in rural areas where coverage sucks anyway. With the introduction of wifi-calling you use wifi to bypass towers and get maximum reception. At work I have no reception and can make and receive calls with total clarity. I don't think the CEO is very tech savy.
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Zayah V, 23 Mar 2016 @ 8:11am

Re:
A lot. They have come up with a new LTE that directs the signal at your phone instead of circular improving reception without having to build tons of towers and the speed is also increased by (and I don't truly understand it) using dual carrier signals or something like that. I have hit 25 megabyte per second downloads in some areas.
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Zayah V, 23 Mar 2016 @ 8:12am

Re:
They basically kicked me out of my unlimited. They purposely made a mistake in changing my plan and then told me they couldn't put me back on it because it no longer exists in their system. Switched to sprint the day after. Dishonest dirty people.
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Brandon, 30 Aug 2016 @ 5:08am

Verizon Wireless is a joke. Its is a high priced communications company that doesn't care about its people anymore. Employees or customers. The company has grown so much over the years (thanks to the people) that it has a high horse mentality that doesn't work in 2016 when coverage is good from most carriers. We don't have flip phones with antennas and poor signals anymore Verizon. Your prices are too High! I worked for the company in sales as a Solutions Specialist for 2 1/2 years. 2014-2016. It was the worst sales job I have ever done! About 1 year in I gathered enough information about this company to know Verizon is clearly headed in the wrong direction. Hiring celebrities and paying them millions to lie, promote and boast your company (Jamie Fox) doesn't mean your better so people should pay more. What a joke. With all of this said, working the internal infrastructure and broken non-working computer equipment was very frustrating, daily. Especially coming from a powerful large corporation like Verizon Wireless. Not what one would expect from a power house company. I'd had become so used to apologizing for things beyond my control that it made me so sick everyday working there. There were days when we couldn't log into our system to even upgrade phones. We could only sell out accessories. This stretch of internal outages would last for 2-3 days at times. I'm Sorry I would reply. Lastly, even the "can you hear me know guy" has moved on to sprint. Check out his new commercials. My advice to all the good people out there sick of the Verizon bullying is to make the switch and do it now. T-Mobile and Sprint do care about us. Thank you, Brandon W.
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Jason, 24 Jan 2020 @ 12:00am

Great Post
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