Editor’s Note: Welcome to our weekly Reality Check column where C-level executives and advisory firms from across the mobile industry share unique insights and experiences.
We just came through a very dynamic week in the telecom industry as events unfolded on multiple fronts. On the spectrum front, AT&T announced that it would be purchasing 1.7/2.1 GHz advanced wireless services spectrum from Cable One. Twenty megahertz is a healthy dose of spectrum for most of the Cable One coverage footprint (the Federal Communications Commission filing did not go into details on which properties were covered by the announcement, but Cable One’s cable footprint covers areas such as Winslow, Ariz.; Joplin, Mo.; Boise, Idaho; Sioux City, Iowa; and Texarkana, Texas. (For a complete view of Cable One’s wireline holdings, the FCC map can be found here.) Combined with AT&T’s January spectrum purchase announcement with Aloha Partners (which covered 50 million population in 14 states), AT&T is putting together a very strong AWS spectrum position.
J.D. Power and Associates had some additional good news for AT&T, finding them slightly ahead of Verizon Wireless on wireless customer service. This is the second time this year that AT&T has won the J.D. Power customer service award. The survey also spelled some troubling news for Sprint, whose full service rankings were basically identical to those of MetroPCS (now a T-Mobile US brand).
But the big news last week (which was technically announced on Feb. 1) was AT&T Mobility’s introduction of their new family/small business plan pricing structure. AT&T Mobility has organized this new plan structure around 10 gigabytes of shared data, which could be divided between ten lines (all plans include unlimited voice and text). There is no throttling after 10 GB – additional data charges of $15 per GB are applied. There are also no individual line limits or allocations – the teens in the family could use 3 GB each and not be throttled. Their messaging is simple – bring a family (and their devices) to AT&T Mobility, get a $40 plan per line (for four lines) that will likely cover data needs for most families, and get a $100 bill credit for every line you bring.
When a customer goes to www.att.com to sign up, things get a lot more confusing. The simplicity contained in the news release is replaced by a conucopia of options:
Instead of one plan bundle, the customer now needs to choose each component (I am hoping this is an easier task in-store or through the phone). Then, the customer is presented with a new question not outlined in the news release – will your family really use 10 GB of data every month?
This seems like a subtle point, but charging different voice/text rates based on the amount of data families use is confusing to the customer. Furthermore, if a customer chooses 8 GB of data (across four lines), their bill will be $30 higher ($190 per month) than if they had chosen 10 GB with the same four lines. In fact, a 4 GB shared plan costs more ($170 per month )than a 10 GB plan.
The complexity does not stop there. If you are a current AT&T Mobility customer, you are not eligible for a bill credit. But if you leave AT&T Mobility (for T-Mobile US) and return to AT&T Mobility in six weeks, then a new credit will apply for every line activated. Termination fees covered by T-Mobile US and bill credits issued by AT&T Mobility. This is the “new world order” for wireless.
The Bottom Line: Ignore AT&T Mobility’s confusing website – it’s all about 10 GB of data and four lines of unlimited voice/text for $160 per month. It’s a lot of data for four lines today, but probably not a lot in a year or so. To the average family, that will look enough like “unlimited everything” to come to a $40-unlimited-per-line conclusion. To AT&T Mobility, the Mobile Value Plan customer looks like a “subsidized” $65 average revenue per user customer (see table above), which is inline with their current postpaid ARPU of $66.35. Not much changed, yet everything seems to have changed.
How will other carriers react to AT&T Mobility’s new plans? That question was partially answered by Sprint, as Boost Mobile introduced new plans at $35 per month that feature unlimited talk, text and 2.5 GB of unthrottled LTE data. That rate goes up to $50 after the six month promotion has ended.
Virgin Mobile, another Sprint prepaid brand, already offers a 2.5 GB data plan for $35 that includes 300 voice minutes. They are responding by lowering the entry point of mobile devices (neither Virgin Mobile nor Boost offer the “zero down” T-Mobile US plan), with new CDMA-capable iPhone 5S devices selling for $440, a full $210 lower than Wal-Mart’s Straight Talk phone price.
Most importantly, Verizon Wireless has not responded with any family plan changes. Fierce Wireless ran a story on Friday outlining a win-back/loyalty offer that has been cited on several Verizon Wireless service blogs this year. It’s unclear how well known the $60 unlimited voice, text and 2 GB of data offer was to current Verizon Wireless customers prior to the article, but it’s a lot better publicized thanks to their article.
Verizon Wireless will have to respond to AT&T Mobility’s offer. Network coverage and speeds are very similar for the two companies, and, while Verizon Wireless and AT&T Mobility use networks with different underlying technologies – with Verizon Wireless’ reliance on CDMA for 3G, a SIM-card swap is not possible; it is for AT&T Mobility customers switching to T-Mobile US. My prediction is Verizon Wireless will resurrect their “double data” plans, creating a $240 per month plan for four unlimited voice, messaging smartphones and 12 GB of data. That $240 contains subsidized devices, creating a “comparable” plan for AT&T Mobility ’s Mobile Value Plans of $140 to $160 ($20 to $25 of embedded subsidy per month).
Verizon Wireless parent company Verizon Communications could also include a pay service in their higher data usage bundles, such as Pandora One or Spotify’s Premium package. Or they could respond with a deeper discount for customers who bundle their FiOS and wireless services, especially for family plans (e.g., $30 combined bill discount for all family plans of four lines or more). While this promotion would have a limited impact to their base, it would solidify a “Verizon One” message. (So would 2 GB of unrated Verizon Wireless streaming per month of FiOS content to any Share Everything device).
My money is on a Verizon Wireless “double data” promotion. The plan is already loaded into Verizon Wireless’ systems and service reps know how to offer it in stores and over the phone. Whether it’s as generous as described above is anyone’s guess, but double data would create substantially less confusion than AT&T Mobility’s Mobile Value Plan and dramatically improve usage and retention.
At the end of the day, there are three foundational battles being fought on wireless plan pricing:
1. Whether consumers will opt for throttled individual or pooled data plans.
2. Whether Verizon Wireless and AT&T Mobility can command a premium for their broader and deeper networks.
3. Whether device pricing can be fully decoupled from postpaid service plan pricing.
The first shots in this battle came from T-Mobile US last March with their launch of Simple Choice plans. AT&T Mobility has (finally) struck back, and Verizon Wireless will likely follow. The “new normal” is $40 per line for four lines of unlimited voice, text and 10 GB of shared data (and no device subsidies). Sprint will likely provide a Framily plan update when they announce earnings this week, and further Sprint-branded changes are likely to come soon. We are just getting started on family plan pricing changes.
Jim Patterson is CEO of Patterson Advisory Group, a tactical consulting and advisory services firm dedicated to the telecommunications industry. Previously, he was EVP – Business Development for Infotel Broadband Services Ltd., the 4G service provider for Reliance Industries Ltd. Patterson also co-founded Mobile Symmetry, an identity-focused applications platform for wireless broadband carriers that was acquired by Infotel in 2011. Prior to Mobile Symmetry, Patterson was President – Wholesale Services for Sprint and has a career that spans over twenty years in telecom and technology. Patterson welcomes your comments at jim@pattersonadvice.com and you can follow him on Twitter @pattersonadvice.
