Verizon Communications Inc. (VZ) Presents at SVB MoffettNathanson Inaugural TMT Conference ()
Verizon Communications Inc. (NYSE:VZ) SVB MoffettNathanson Inaugural TMT Conference May 16, 2023 8:00 AM ET
Company Participants
Sowmyanarayan Sampath - EVP and CEO for Verizon Consumer Group
Conference Call Participants
Craig Moffett - MoffettNathanson
Craig Moffett
[Call Starts Abruptly] I think it is now passed or will shortly be embargoed until 8:00 o'clock -- is that what -- why don't you quickly just share with everyone the news from this morning and the sort of strategic relaunch of your plans?
Sowmyanarayan Sampath
Craig. Good morning. So good to be here. Everything I say will be covered by the safe harbor statement. For those who can't find it, it's in our Investor Relations site. We'll be saying things that are forward looking, so they're risk associated with, but the safe harbor covers all of it. Okay? We got that out of the way. I am so excited today to be launching what we call myPlan. It is a next generation plan that fundamentally changes how wireless is bought in this country today. Five years ago, we set the market with mix and match, which is a concept and everyone followed us after that.
We went back to our fundamental roots and says, what irritates customers the most, and then we found three things. They want flexibility, they want control, and they want more value. And we said, you know what, we are going to give them a 100% of all three of them. And we came up with myPlan. So myPlan essentially does, is you go in and first you decide what two network options you have. We have two network options. You know what? Of course one is called welcome.
One is called plus, two network options. And that is the core. That's the main actor and actress of the whole plan. It's the network. So you first choose the network, if you want to be on a basic plan, you take the basic, if you want to be on an advanced network with all the bells and whistles, which is because we have the best network on earth, go and choose that. Then after that you can decide for both the plans, what perks you want.
And these perks are exclusive. They're only available with Verizon and tremendous value for customers. So, the combination of that is pretty intense because it's flexible. A customer can decide for one line to do one thing for the other line, to do one thing, and then second they can change it. I don't need contracts. They can change whenever they want. It's pretty unique and I think it's, and…
Question-and-Answer Session
Q - Craig Moffett
And by the way, just -- those perks are things like Apple Music or the Disney+ packages or those sorts of things, right?
Sowmyanarayan Sampath
Exactly. And it's at a price point that you can $10, it's $10 per perk. And invariably, you'll end up saving an average of five to six bucks per month. So, a typical family will end up saving $50 every single month just on a mix of perks that we have.
Craig Moffett
Yes. So, if I were to add five of them or 10 -- if you added and you have nine of them total to choose from. Is that right?
Sowmyanarayan Sampath
Yes.
Craig Moffett
Okay.
Sowmyanarayan Sampath
And then further, if you want, hey, what, I don't like the perks. I want HBO, I want Peloton, I want MasterClass. We give you credit and plus play. So, you know, you get $10 perk, but you get a $15 credit that you can redeem there. And then that has 30 different partners already. So, it's a unique collection of assets, partner assets who've decided to work with us at price points that are not available elsewhere. But the star of the show is the two networks. It fundamentally simplifies our offering.
Craig Moffett
Two plans, you mean?
Sowmyanarayan Sampath
It's two plan. Yes. Plus welcome, and plus we used to have six of them. Six was too many unless you're going for an Indian buffet. So, we came down to two and we love those two plans because it shows who we are. It shows the value of our network, which is kind of the start of the show.
Craig Moffett
So, any customer that is either a new customer or as I understand it, you're not going to force migrate anyone, but this'll be available to any customer starting Thursday. And all new customers will be brought in on one of these two plants.
Sowmyanarayan Sampath
Exactly. There's no forced migration. Customers can choose when they get on it, but more importantly like ours some of our competitors, we don't need the whole family to get in on this as well. You know, the kids may say, we want this, the parents may say they don't want this. So you can stay between older plans as well as new plans. And that's unique. Look, it's about flexibility. People talk about flexibility, but don't give flexibility, here it's a hundred percent flexibility, a hundred percent control. It's truly next gen plan.
Craig Moffett
And, just to dig in a little bit more for the numbers kicks in here. The plans that you offer when you're offering, I don't want to name any specific name, but unbalance. If I'm offering what is essentially a $15 perk for $10, you're still making a positive gross margin? Or is it roughly a pass through?
Sowmyanarayan Sampath
No, two things overall, these plans were contemplated when we did the guidance. So, it's kind of baked into the guidance from a service revenue, EBITDA and a free flash flow perspective. So that's one. Second is these perks are across the board on average, 30% gross margin for us. So, they're hugely accretive to us even at the price points that we have on average across all the plans.
Craig Moffett
So, you've obviously got good wholesale rates from the suppliers.
Sowmyanarayan Sampath
Yes.
Craig Moffett
And in a lot of cases you're now the largest distributor of some of these services, is that right?
Sowmyanarayan Sampath
On most of them, we have the largest, probably the single largest DCTs distributor of content today in the industry. And that gives us a very unique point. Another thing is also around churn mitigation. We've been doing churn management, churn mitigation since, well, literally I was in my shots. So, we've built that capability in the Company and some of our partners like that. They see low churn, they see lot of engagement, which is why they give us the rates they do, but also the exclusive partnership.
Craig Moffett
So let's zoom out for a little bit on this plan. As you said, this was fully contemplated in guidance. The planning for this obviously started even before you wore your new hat. But you have now worn a lot of hats in the Company, everything from Strategy to most recently the Business segment, now the Consumer segment. When you stepped in and started thinking about these plans and the sort of reset of the strategy of the Consumer business talk to me about what these plan -- what problem it is these plans are trying to address and how that's going to work?
Sowmyanarayan Sampath
Yes. If you look at our Service revenue growth, it's been primarily price driven. If price and quantity make up Service revenue, for the last couple of quarters, more than a couple of quarters, we have been 100% relying on price and literally zero percent on quantity. While that works well for us given the quality of our base high FICO score of our base, to have a sustainable medium-term business, we need a better balance between P and Q.
I would like it to be in the 80:20 range, 80% price, 20% quantity. So, that's the overall mission that we are going to go to create a sustainable business. This creates an opportunity that's fresh in the market, it's unique, it's massively differentiated, and we think that will further help us to get momentum back in our business. So, that's the core thesis of why we did the plans, when we did it.
Craig Moffett
So, this is clearly -- you are expecting then that this accelerates your net adds presumably postpaid net ads, but I always think about starting with the industry total phone net ads. So let's drill down on that a little bit because you can't be the only one in this industry thinking, I want to get either my share or accelerate my share of net adds. But at the same time, industry growth rate of net adds seems to be decelerating and cable is taking more. So first, let's drill down on the industry growth rate question. How do you see the subscriber growth challenge for the industry? I think we have been writing for a couple of years now far in excess of population growth. What do you think is sustainable?
Sowmyanarayan Sampath
Look, historically in the last -- and I used historically, it's COVID times, the industry grew between 9 million and 9.5 million phone postpaid net ads every single year. We think the sustainable level is closer to 5 million or 6 million. Now why did it grow north of 9 million? There were a bunch of reasons. One is people tended to have two phones. Younger kids had phones, older people kept more phones. There was migration on the business side because of regulation people ended up carrying two phones.
So that was a bulk of the reason and the last is the pre to post migration. Up to a third of all the industry phone nets actually come from pre post migration. We see the whole category as a whole coming back to a 5 million or 6 million year growth category, which we think is sustainable. It's around 2.5x, 3x population growth, including for immigration and things like that, which we think is a sustainable, long-term growth rate of the industry. And that's good for us, look if the market does slow down to 5 million or 6 million given a large base, it's actually better for an incumbent like us to continue driving more pricing power in the market.
Craig Moffett
But let me drill down on that because Charter is now growing at something like on your network obviously, but it's growing at more than a couple of million per year. Comcast seems to be accelerating into well over 1 million per year unarguably. So call cable 3 million to 4 million of the 5 million per million of the five. How does the math work for UT mobile and AT&T to fight over what's left, which might only be a couple of million, which is less than T-mobile's guidance?
Sowmyanarayan Sampath
Look, I don't know -- look cable is a great partner to us. I don't know if that run rate is sustainable in the medium term, long term, look free is an easy thing to do, giving out free lines is definitely an easy thing to do, but that's not how we want to build our business. So look, we think at 5million or 6 million that gives us opportunity to have some net add growth, but strong p growth, price growth with ARPU accretion with our new buy plant. And that makes for a pretty healthy business for us.
Craig Moffett
So, I want to turn back to something that as I've been really focused on, which is for years the value proposition for the consumer group for all of Verizon really. But let's keep your consumer hat on for a second. It was really simple. It was, we've got the best network and customers paid extra for the fact that you had the best network, and your target customer flowed from that.
Your target customer was somebody who obviously cared deeply about network superiority. They tended to be affluent, as you said, very high FICO scores. And there was I think a certain cache in having Verizon service for people who sort of self-identified as I need the best network.
I think I can probably speak for a lot of investors in saying that the value proposition is less clear now. It's harder to make the case, at least for a lot of us in this room, that there is clear network superiority anymore. So, first I guess, is network superiority still possible? And if so, make the case for why Verizon still has it?
Sowmyanarayan Sampath
Yes, there are two questions in that is it possible and B, why Verizon has the best network? Let me answer the first one. For a country this large with such a diverse geographical place with such different local zoning rules and others, there will always be a better operator. Historically, Verizon's been that better operator. We had the least amount of spectrum and we were the best operator forever.
Now, we have the most amount of spectrum, we'll be the even better operator. And a couple of reasons why I think the first one is, our coverage of spectrum. I mean, we have the millimeter wave. Everyone's talking more about millimeter wave than ever before. We got into that early because it gives us capacity and stadiums, and venues, and dense urban corridors. So that's a big one for us.
Second is our C-band. I mean, think about it, right now we've only deployed 60 megahertz of all the C-band spectrum we bought, we paid 53 billion for it. So roughly only $15, $17, $18 billion of that spectrum has been deployed. We have another 100 megahertz of that spectrum coming back end of the year, first thing next year. And then last is the way we run our network. We like to build our own fiber.
More than half our sites have our own fiber. And when people talk about planning in the network, ran is not the only thing that is congested, it's also the back haul. We don't worry about that because we have our own fiber. All our -- most of our sites are concrete. Most of our sites have generators. We densified the network a lot more. So once we finish or get close to finishing our C-band build with the millimeter wave and some of the other capabilities we have, we do have the best network.
I mean, look, route metrics is the one we track. It's scientific. If you guys haven't seen route metrics, it's a truck. They put 30, 40 phones and they ride non-stop a couple of million miles a year. And then they tell you who's the best network, 96 of the top 100 cities, we were the number one network. So you don't get scores like that by not having the best network. So, we are consistently confident that we -- A have the best network and once we roll out the, finish the C-band. We'll have the even best network. And there'll always be a better network operator in the country just given the size and scale of this.
Craig Moffett
So what do you do to better communicate that, to sort of regain that psychic high ground in the consumer's mind of, yes, these guys are the best.
Sowmyanarayan Sampath
Look, I think the first is. It's marketing. We have been very consistent around network marketing and this whole price plan that we've launched. The center, the star character is the network. You come in and you choose two network options, A and B creatively call welcome and plus. And those are two options you choose. And we have to keep reinforcing that at every single touch point that we see in the customer. And over a…
Craig Moffett
And by the way, and just to be clear, so, the Plus is ultra wide -- ultra wide band unlimited. The intro plan is nationwide, which is low frequency, not the same speeds as the C-band.
Sowmyanarayan Sampath
Yes. But it also has coverage. I'll tell you another interesting thing. Sitting this morning, we have 200,000 square miles more coverage than T-Mobile does. 200,000 square miles, that's almost the size of Texas. We have more coverage than T-Mobile does. So, look, we have very good coverage on our LTE plus as we build out 5G.
Craig Moffett
I want to be a little more tactical here, because AT&T has spent the last couple of years competing on device promotions with lots of free hand sets. T-Mobile's now go, 5G is now free handsets every two years. Talk about how the new plans and how your thinking has evolved about handsets and the handset promotion wars? How do you keep from getting dragged into just constantly subsidizing handsets in a way that gives away the customer lifetime value of the relationship?
Sowmyanarayan Sampath
Look, handset, giving away, handsets is a great tool for us to retaining customer as well, enhancing the value that they see on a network. Because they get a new device that gets access to all the new spectrum and hence we get a better network experience. But today, we don't feel the need to give a free handset to every single one of them, which is why in our welcome plan, our lower end plan.
There are no free --- there are no handset, mostly bring our own device. We are very comfortable with it. On a high end plan, we do that. But the second is our base. If we have a base as large as our 75 million line base that we have. On that base, we can surgically go and decide who should get a new handset and who does not get a new handset. And we have these complex models, we go and we are able to target customers very tactically. So, it's a great tool for us. The math pays out very well.
Look, a lot of the headline prices you see on promotions in reality doesn't cost us that much because you get a trade in back. We are able to monetize that trade-in quite well. So, it's a very accretive deal for us when we give out promotions on handsets, but we don't feel the need to give out handsets on every single line base in new.
Craig Moffett
So, but it has worked to shrink the gross ad pool considerably, because it's taken particularly AT&T's churn rate down. Your churn rate has actually risen a bit. Is there a strong pull though to say, do you think that the new plans and the handset subsidies that you'll do for, particularly for the high end customers? Is that going to reduce churn finally and you get through this churn bubble as you've described it from the pricing?
Sowmyanarayan Sampath
Yes. Look, our churn has gone up a little sequentially in the first quarter. But it is predictable churn. I mean, last year we drove $2 billion in incremental revenue driven by pricing actions. I mean, there are not too many companies on earth that can drive $2 billion incremental from the base almost on ARR basis. That's kind of what we did last year in that for that we saw a slight jump in bubble.
We are in the back end of that bubble right now. There are a few remnants, small, tiny bubbles that we are working through right now, but our overall base is really healthy. They like us, they like the value prop they have. And we think with the current, myPlan, a lot of customers will see value in moving to one of our two network options. And we do see certain stabilizing over a period of time.
Craig Moffett
So, you -- I think it's fair to say that, you expect the new plans particularly because of packages that you can add on top of the base, will be accretive to ARPA for average revenue per account. I still am stuck in the old thought of ARPU and individual lines. Is it right to think that, these are going to be sort of roughly ARPU neutral but ARPA accretive or...
Sowmyanarayan Sampath
These will end up being ARPA accretive over a period of time. And typically in first year, we will see some accretion, second year even more, third year even more because typically what we will see is customers will bring in one of the two options, take perks, keep increasing the perks as they go along the network. So, this is ARPA accretive definitely for us. As we think about it.
Craig Moffett
And again, you think this is going to be net ad accretive also.
Sowmyanarayan Sampath
Over a period of time as we work through our churn bubble back end of it, it is going to be net add accretive for us. Look, we see more momentum coming into our business. I mean in the first quarter we saw 11% growth ad improvement in it. Momentum continues in our business. So this is the right time for launch something fresh. When we have momentum, we are taking the market well and customers are reacting well to what we have put in front of them.
Craig Moffett
I want to pivot a little bit to the cost side of the equation for a second. You have seen some cost inflation that's actually what triggered some of the price increases at least the narrative that you gave last year. Talk about what the status of that is today. Are you seeing those cost pressures accelerate, decelerate? What's the latest that you are seeing with the results?
Sowmyanarayan Sampath
We saw $0.5 billion cost pressure last year, primarily out of two bucket, wages and energy. Those were the two hot topics for us last year. Most of them we have kind of lapped the results on and things have stabilized a fair bit. So there may be some pockets of inflation that we see in the business, but overall, it has stabilized quite well and we are comfortable with the position we are in right now.
Craig Moffett
Is it fair to say that, the cost inflation that you have seen roughly offsets the price increases that you took, that you have already taken on the old plans? Or is there still some margin expansion to be had out of those price increases?
Sowmyanarayan Sampath
Look, most of our -- we are now moving to the myPlan, the new plant structure we have. So that will be the source of most of our work right now. A, do we migrate certain pools of our customers? Do we ask them to migrate? Do we incentivize, to migrate and over? That's where the bulk of activity is going to go. And that's the reason why we got this myPlan structure in place.
I mean, think about it, it's a segment of one. People have been talking on the segment of one for ages 20, 30 years. We finally have it. Every customer can go and choose her plan the way she wants it in exactly the format she wants with the price constructs, with the perks. So, it's a pretty cool option and it gives us huge functionality and flexibility on how we want to manage the base.
Sowmyanarayan Sampath
I want to pivot to the prepaid side of the business and TracFone. You articulated a strategy originally with TracFone of being able to address the whole market. There is clearly a part of the market for whom prepaid is still the right answer. But it's just been a constant struggle. Talk about what you are seeing in the prepaid market, and is this just a matter of having a horse in the race for when a recession ultimately comes you are position for it? Or is there something fundamentally that you can do now to make TracFone start to gain better traction?
Sowmyanarayan Sampath
We have a little more work to do in TracFone. Step one is finish the integration. When two families come together, there is usual fair amount of work that needs to happen, so we are going to finish the integration work. Second is network migration. We still have 10% to 20% of our customers still on other networks. We got to bring them onto the Verizon network. With that, you get churn, you have to kind of work through that.
The third piece is we are building out our exclusive distribution by total by Verizon. It's a fresh brand. We have couple hundred stores. We are going to expand that massively. But overall, the thesis is we want to be the number one player in the value market. And we have brands. We have six brands that, directional brands that cut across. We have total by Verizon, which is a Flanker brand exclusive, sold and totaled by Verizon stores only as well as some national retailers.
Then we have Straight Talk, which is a Walmart exclusive brand, which is one of the largest prepaid brands around, just given the Walmart intensity. Then we have our Verizon, we have visible, they say it's for singles. I don't know. I have it too, but -- so different segments are well covered in the prepaid space.
Craig Moffett
And how does the new welcome plan fit with what you're going to be doing in prepaid? Is it your expectation that there'll be a fair amount of crossover and you'll actually see a lot more migration from prepaid to postpaid? Or how does that work?
Sowmyanarayan Sampath
Look, historically in the last couple of years, the third of the industry, net ads have actually come from pre to postpaid. We are still have worked to do before. We can take advantage of that. Some of has to do with system technology stacks, how we integrate the two things. The migration of a customer from prepaid to postpaid has to be seamless. It cannot be complicated, it cannot be intense. So, we've got some work to do, which is why none of that is baked into our immediate forecast right now.
Craig Moffett
I want to talk about another one of the really interesting parts of the Verizon story, and that's your relationship with cable. You've got a strong business relationship. I think a lot of people scratch their heads over the whether or not that's a double-edged sword and whether cable potentially does more harm than good. Talk about that if you would and talk about where you think their customers are coming from?
Sowmyanarayan Sampath
Look, it's a good relationship. It creates more monetization for the best network on Earth. It's marginal creative and service revenue or creative for us. So, overall, it's a very good business for us. And look, it's like any frenemy relationship. We go and we compete in the retail market aggressively, and then in the wholesale market, we want to be there -- we want to be their best supplier and best partner.
So it's kind of a pretty straightforward relationship. On the wire line side we've done that for decades and we know how to do that. Look, they are bundling aggressively. There's a lot of prepaid as well that, ends up converting there. But from third party results, we see that we lose disproportionately less to cable than some of the others. And that's the core of the thesis. When we lose less, it tends to be more creative to all of us.
Craig Moffett
So, I think most people get the math, let's say roughly you make about half as much on a wholesale customer as you do on a retail customer, but for every three customers that cable gets, only one of them comes from you. So let's say net, net you're up 1.5 for everyone that you lose. So, the math works as long as cable's not deflationary, but isn't cable sort of self-evidently deflationary?
Sowmyanarayan Sampath
LOOK they are using it as a way to bundle with their broadband. And look, that's a prerogative they should do that. What we see is people will always, there will always be a lower cost option in any market. And this market is no exception to that rule. But what we want to do is our value prop remains the same best network, best value prop, best promotions, and then a good marketing to go off that. So that's literally our plan and we are not changing it.
Craig Moffett
So you talked about convergence in the cable offers. It's interesting to me that your new offers don't put convergence first. Talk about the thinking behind that FWA is not a big part of what you introduced this morning.
Sowmyanarayan Sampath
Yes, look, FWA is the core to what - it's one of our biggest pillars of growth right now. I mean, we are -- it's such a good business for us and unlike other people's convergence, I don't have to cut a check to anyone else. It's a hundred percent hugely margin creative. The cost of goods sold is very low for that. We get owners economics on our fixed wireless bundle.
Look, we've guided to close to 5 million customers. We've definitely built more network capacity than that. We've definitely have more network capacity than that. And what we are finding on our fixed wireless business is once you get through the first 90 days, our churn is not that materially different from FiOS. So once you get through the 90 day churn, our churn is not that materially different from FiOS. So it's a really sticky product. High NPS, I think our NPS is 36 Net Promoter Score on fixed wireless access compared to negative 19 or negative 20 for the cable company. So, it's a great product that we are seeing good runway there.
And then when we get the next branch of spectrum, another 100 megahertz that drops end of this year, early next year, that just opens up a lot more offer it for sale. I mean, as of this morning, we are the number one broadband company in the country today. We can offer broadband to more homes and businesses than anyone else can. And that's a pretty unique place for us to be in. And if you see the, myPlan, you get discounts when you take the premium tier, you get a discount, a massive bundle discount that customers will take as part of the piece.
Craig Moffett
Yes. So, but still, I'm going to keep pressing on this because the cable guys have increasingly said, this is the centerpiece of what we're offering and we're going to lead with a converged offering. Your decision was that to some extent it's -- FWA is a bit of a standalone product still is your view. You must have seen customer research that said the customer doesn't necessarily want to buy them both together, right? Or else you would've said, we're going to lead with that. What is it that you saw that that's presumably different than what they saw that said do you think it's a mistake to think that the customer wants to buy fixed and mobile together?
Sowmyanarayan Sampath
Look 10% of our base average across the country today have a converged offer. We think that'll continue to grow at a certain pace and we want to take part in that growth and be that. But what I don't want to do is give away the product free. Free is a great way to drive convergence. It's a very easy way to drive convergence. It's a very lazy way to drive convergence as well. We don't see the need to do that at all.
Look, our fixed wireless product has a high value high NPS core, and I want to create more revenue ARPU to that piece. We want to build a FWA a business that is sustainable over a period of time that has low churn, ARPU that is growing consistently year after year. And that's exactly what we are doing. We are playing for the long term on the FWA piece, and we don't want any sugar highs as we work through the product.
Craig Moffett
But it -- so but it is a very low marginal cost product if you are going to do it on your existing capacity. And as you said, you think your runway for existing capacity is very long. So you have a about 2 million subscribers now, I think you've said that from, at least for the consumer segment, 75% of gross ads come from urban and suburban. 50% to 60% come from cable. If you look towards the medium term target of 5 million subscribers, where do the next 3 million come from? Is it in terms of the mix that I was just describing of from cable, from urban, suburban rural?
Sowmyanarayan Sampath
Look, we see a pretty similar mix. Historically, because we are a C-band spectrum build out, it tends to be urban, suburban area. Once a new tranche comes in end of this year next year, it's going to be the semi rural, the rural areas. So, we are going to go after that space very aggressively on FWA. And so we are going to continue to see a similar trend. The urban rural mix may change a little, but this continued share that we take from cable will remain the same, if not grow.
Craig Moffett
T-Mobile on their last earnings call where their target is 7 million to 8 million, but they were pretty explicit in saying when we gave the 7 million to 8 million guidance, it was because that was based on what we have capacity to do. And then they at least opened the door to maybe beyond that we start to invest in the network to support additional capacity. What you have said is that I don't need to invest more in additional capacity. I've got all the capacity I need. But they have more mid-band spectrum than you do and at least more macro cell density than you do. Why is it that they see capacity constraints that you don't see?
Sowmyanarayan Sampath
Look, we have occupied -- the way our OFS, the way we bring offered for sale or OFS has been much more slowly and more consistently phased out that gives us time to build out capacity. Second is capacity is a combination of many things. One is just spectrum. We have a lot of spectrum, but we also have millimeter wave spectrum. Suddenly, it's going to be the hot thing right now because everyone is going to need a lot of millimeter wave spectrum, especially in really dense urban corridors and things like that. So, one is that.
Second is densification. Over the last seven, eight years, we have really densified our networking places where people live, people play, people do interesting things. So we have gone and densified the network. Third is our fiber portfolio. Greater than half our sites today have our own fiber. As I said, a lot of times the constraint is actually on the backhaul as opposed to on the ran side, we have capability to do that.
Fourth is virtualize, we virtualized the huge portion of our network. So ability for us to add capacity quickly is quite easy. So because of all those things, we feel very comfortable about the capacity, the runway that we have for FWA right now, and I want to build a sustainable long-term business that has no churn, growing ARPU and NPS definitely greater than negative 20. I want to be significantly north 40.
Craig Moffett
What percentage of your customers do you think you can use the millimeter wave network? Is that -- today that's a pretty small number and it's going to take a lot more densification. Is that a reasonable expectation to say, I'm going to densify a lot more. And is that exclusively for the purposes of FWA?
Sowmyanarayan Sampath
Look, today we don't have any FWA exclusive bills in the network. We just don't do that. At some point, we will when we get to that point and that will be a clean ROI decision, whether we build capacity for FWA or not. We don't have at today. Look, millimeter wave is on 30,000 sites already today right now. So a lot of people use it. It's available on almost all the handsets that we sell, except for some of our prepaid handsets. So, people use it more than people think they use it. It's a great experience, and invariably people over a period of time will end up using it more.
Craig Moffett
In addition to operating your FWA network, you still also operate a pretty large fiber network. Even in the consumer segment, not just in the backbone, but you are increasing your fiber open for sale at about 500,000 to 550,000 homes a year. But some of your peers are taking a really aggressive approach. Talk about the economics of fiber expansion, and given how large your fiber network already is, do you think that, you already know something that your peers still need to learn about fiber deployment?
Sowmyanarayan Sampath
Look, we are the OG fiber players, in 2004 when people are still figuring out what fiber was, we were up in Kelly, Texas laying out fiber. I mean, it's pretty unfair to compare us who've been doing fiber for almost 20 years with some of the others who are doing it for the last three or four years and feel like they found something new.
Look, fiber for us, it over the period we've completely optimized our supply chain, our network operations, our fault rate, our customer acquisition. It's a well honed machine. I mean there are parts of the country including kind of where we are -- where we have shared north of 60%. So we know how to compete with cable very well as we build our fiber.
The bills that we do are incremental half a million more roughly every year. And a lot of it is around two areas. One is edge outs. When you get to the edge of the network, there's a little more, there's a new development, there's a new subdivision, let's go and build it out. But second is also a copper to fiber migration.
We have a very ambitious network transformation plan that we started six or seven years ago. That was when I got my first real job on how to move that business over to fiber. So, we've got some of those capabilities on how to transfer our copper lines into fiber. So, it's a fair amount of learning, but we are a very mature company as far as fiber does today.
Craig Moffett
And the northeast is distinct in that it is much more aerial. And so the economics here were better and much denser than any other part of the country. And so, arguably you had the best setup back in 2004 by a really wide margin to say, of course it made sense to do fiber in the Northeast where it's aerial and dense. Is your expectation that once the bead money starts to flow, that there's going to be a lot of cost inflation? And that coupled with the fact that more of it's going to be buried and a lot of it's going to be lower density, that there's -- that it's going to be harder to make a return on all of those investments that are being made?
Sowmyanarayan Sampath
Look, definitely there will be inflation in fiber bill. I mean we have really long-term contracts on labor, on supply chain materials. So we are kind of -- if we are probably the most insulated of any of our peers when it comes to long-term costs on our fiber bill program, because we've been doing it for a long time.
Look, the bead money definitely will add to the tension, but more importantly it's also the infrastructure money that's going to come in, because someone who can trench can also go and do other things. So, there's a lot more competition. So folks who are getting started on fiber or a slightly expanding fiber, they have a lot to kind of grapple through right now.
But with our bill plan of 500,000 homes, homes/businesses, additional every year plus our one fiber plan, we feel very confident we have the supply chain runway and long-term contracts to keep us at a great price point.
Craig Moffett
And you mentioned a couple of minutes ago copper retirement. Talk to me about copper retirement. How realistic is that really? Regulators have historically been so reluctant to approve copper decommissioning. So is it just a question of replace as much as you can and reduce the cost as much as you can? Or is there a real plan of saying let's try to take some copper wire centers fully out of service and…
Sowmyanarayan Sampath
Look, we -- of all the carriers literally in the world, we are one of the very few who've actually gone and converted wire centers or central offices to a 100% fiber. It's pretty cool when you go into these buildings. These are large buildings that had a ton of corporate equipment frame in it. And right now, you don't need all of that because a fiber sits in a much smaller profile and you're able to take a lot of cost, mostly energy saving, maintenance cost out of the network.
But it's a long-term program to do that. It takes time, you have to migrate. But more importantly, we have to provide customers with choice, business customers as well as home customers with choice on the new product, what we call catch products. So, the fair amount of work to do that, it's a sustained program that will keep going incremental. A lot of that 500,000 OFS that we offer on fiber is because of the copper migration that we end up doing.
Craig Moffett
Until recently, when you were running the business group, you had a lot of success in contrast to what has been a more difficult environment historically in the consumer side. Talk about the underlying trends in the business side of the business that you sort of leave behind and you were seeing there?
Sowmyanarayan Sampath
Look, it's a very healthy business. On the wireless side, we have 45% market share. And every single quarter, we get more than 40% of industry growth. In terms of nets into our business, it's a very healthy business that's run very well and we see continued traction in that space. Look, there are some spots, especially on tech companies doing layoffs. We have a large exposure to them. There's some short term pressure, but the overall thesis continues to hold in that business.
It's healthy and it's going to continue to grow very well, and it's driven by a couple of things. One is we are able to offer distribution to every segment. If someone goes and opens a new company today, the bank will definitely call you, but in three days, Verizon will call you because we want you to have your first phone line with us. So just deep distribution with best network that's designed for the business in places as well as that, and then account services, I mean, we have customer account teams and some of our large public sector and enterprise accounts that are almost impossible for others to replicate, and that gives us strength in that business.
Craig Moffett
So, when T-Mobile and even now cable are talking about the inroads that they're making in business some of it has to be coming from you just given how large your share is. How are you seeing them compete and what's different in the way they compete versus the way you try to retain?
Sowmyanarayan Sampath
Look, we continue to win. We own 45% of the base and we continue to win well north of 40% of industry net ads. So, it's coming from someone, I don't know whether it's coming from me or not, just given the numbers, it doesn't make sense. Look, where they tend to do very well is the low end of the SMB segment. Typically, the one to four line segment. You see good traction there. But when it comes to medium business, public sector, global enterprise, our mode is deep and wide. And you don't want to step into that mode.
Craig Moffett
You have so many relationships. You've got a really unique perch to see the macro economy. So, I don't want to miss the opportunity to ask what your perspective is on the recession that we've now all been waiting for 18 months. And it's always seems to be six months around the corner.
Sowmyanarayan Sampath
Yes, I think, economists have predicted eight of the last five recessions. So, I'll leave that to them to do. But look, from our vantage point, look, we have a billing relationship with almost every second household in the country, all the Fortune 500 companies and one in two small businesses. So it's a pretty interesting vantage point from us. What we tend to see is customers are trading up to trade down. There are some categories where they want to trade up. Wireless is one of them. That's why they want the better network. They'll continue to trade up and they'll trade down in certain categories.
They may buy store brand cereal so they get the best network so they can do things. So that piece continues to happen, but the customer is relatively healthy right now. Most of our payment and other trends are going back to the pre COVID levels. So COVID was a rush. There was $4 trillion of liquidity extra in the business. People worked through that, but most of our trends are pre COVID, which continues to be healthy right now we see in healthy piece. There are some hotspots like tech companies where we see a number of layoffs and they're managing through their cost position a little carefully, but by and large, we see a pretty healthy economy right now.
Craig Moffett
I don't want to miss the opportunity also to talk about some of the fun stuff of 5G, which was admittedly more on the business side than the consumer side, but mobile edge compute, private networks and enterprise solutions, I think, it's fair to say that those have either been slower to materialize or look smaller than we once thought. Is that right? What's your house view in Verizon about the monetization efforts? I mean, you spent so much money on C-band. It can't be that the real monetization of C-band is only fixed wireless. Where does the monetization of C-band come from with respect to all the 5G opportunities that we were talking about a couple of years ago?
Sowmyanarayan Sampath
Look, first is fixed wireless access. I mean, think about it. We have an $80 billion TAM that we did not have access to. $80 billion TAM and we are growing. I mean, last quarter we were almost 40% of all industry net adds on broadband came from Verizon fixed wireless, that's how strong a fixed wireless franchise is and could not have been possible, if we didn't have 5G both from a capacity and a speed perspective.
And I'll tell you, look today on the current C-band that we have, we can read speeds of 900 to a gig speed. When we get the new band, we can go up to 2.4 gigs in terms speed. So, speed and capacity definitely FWA, it's a great business and we made the right call on C-band to grow that space.
Jumping on to the other pieces on the business side, look, the MEC, the mobile edge compute has been a little slower to develop. But what we are seeing is private networks is doing incredibly well. By second third quarter last year, we went from -- we have one installation to now, we have tens of installations, new installations every single quarter that business is growing very fast. And that almost becomes the control point for our corporate liable business, if you see more broadly.
So, the private networks is doing well. Once that happens, it will grab the mobile edge compute business use case along with it. We have started some interesting use cases, warehouses, logistics, supply chain, venues. Those are 4 or 5 places where we have seen traction. Government, healthcare, we have seen work a little slower to materialize than what it is, but little slower, but in the last I would say three or four quarters, we are seeing good traction in this space, led by private networks primarily.
Craig Moffett
And what role do you play in the private network? Because typically in a private network instantiation, there is a systems integrator, there are software companies. There is a Paulo Alto Networks or security companies. And so, there is a lot of people with their fingers in the pie. And so, it's always puzzled me how much of the economics is Verizon going to be able to get out of those relationships?
Sowmyanarayan Sampath
It's not dissimilar from a macro network, like we go into a large company like Associated British Ports or BlackRock or one of the companies that we have actually rolled out 5G. We go and reinstall the network, similar to what we do on our macro sites. We run the network on a managed services basis. We troubleshoot it when things go bad and we charge the users for it.
So it's a pretty accretive business for us because we own the license spectrum it runs on. See, that's the key to it. A system integrator cannot run and manage things that are on license spectrum. And if you are going to put a private network, by and large, you want it unlicensed spectrum.
Otherwise, why would you put a private network in place because the value is so much more accretive on license versus unlicensed spectrum. So, there will always be players, that's a reasonably crowded market, but very few do it on license spectrum. It's us and probably a couple of the other carriers who do that. So that gives us an advantage point.
Second is, the services that we can sell on top of it. Of course, the day one network where they have managed services that sit, on a security that goes on top of it. And then further the MEC to do that, we need a private network. So there is a good layering of the cake that happens on that piece.
Craig Moffett
So now, I want to sort of zoomed back out again. We started this morning with the new plans. How confident are you that the new plans get not just the consumer segment, but all of Verizon back on the path to being a growth company again?
Sowmyanarayan Sampath
Yes. Look, we stay true to our guidance. We want to grow between 2.5% and 4.5% service revenue growth. That's a healthy piece for us to grow. But let me tell you a couple of other things that are in place for us to see momentum in our business. The cornerstone of that is the myPlan piece. We wanted a fresh offering that is completely differentiated, that puts the customer back at the center of everything.
People ask me, is it the price up? It's a price down. It's neither, it's ultimate flexibility and ultimate freedom. And that resonates very well with customers. We've tested it. This has pre been one of the largest researched projects we've ever done. Tens of thousands of people we've spoken to, and they resonated well when we say ultimate freedom.
Craig Moffett
And I assume big marketing push behind it starting today, is that right? Just starting tomorrow?
Sowmyanarayan Sampath
Yes. Starting tomorrow, you're going to see it. If you don't see it, you're living under a rock. So we are really confident about the promotions there. The second thing for us has been around our market structure. Look for us over the last couple of years, we've become a very national AK centralized company. A lot of our decisions get taken central in Basking Ridge.
We are going to start going back to a more regional market driven model right now, because I want to reduce the time and the fidelity of information between the field and where I am right now. So, you're going to see us get back to a much more defined aggressive market structure with leaders who can take decisions in the field and get closer to a customer in a meaningful way.
Craig Moffett
Now, it's interesting that would be geographic because if I think about, you and I have talked a little bit about sort of the coming of AI and how AI can change the way you think about segmentation in marketing. But that's not -- probably not primarily geographic. It's probably with incredibly detailed psychographic and demographic segmentation. Talk about that as maybe a closing way to think about where Verizon goes next.
Sowmyanarayan Sampath
Yes. Look, we've built some incredible models. People talk of AI. We've been doing it for a while. We've been incredible models where we can target a segment of one. We can go to a single customer and predict a, what he or she's likely going to use. That's why even in our myPlan structure, a vast majority of customers are going to take the recommended plans that we offer them, because we know what they like, what they're likely to take. So, we've gone to the segment of one marketing. For us to get field, why we need these markets in the field is to drive field performance.
Look, Verizon historically has been a phenomenal company on execution. When we say something, we do something. So this is our step towards going back through that culture of just strong execution in the field. We are going to bring back more aggressive sales incentive for our salespeople to do that, and just get the rigor and more job back to where that piece. The myPlan is a big element for it, but getting to a market structure, local marketing, local community activation, and this execution rigor, when you put all four of that with an underlying framework of AI driven segmentation of one, it creates a pretty compelling value prop for us to go and win in this space.
Craig Moffett
I can't tell you how excited I am for you in the new role and I can sort of feel how energized you are about sort of putting Verizon on this new path. So, I wish you great success and I want to thank you for being with us this morning, and I look forward to next year to getting a progress report and seeing how it's all going.
Sowmyanarayan Sampath
So, green, green, green, thank you.
