While the fourth quarter typically is the most competitive quarter of the year for mobile phone
operators, a recent pricing study from Robinson-Humphrey Co. L.L.C. concludes that increased industry competition
did not lead to dramatic price declines in the fourth quarter.
The study found overall wireless pricing for local
service decreased by about 13 percent on average since September, with the highest decreases in the mid-level plans-
the apparent target of holiday promotions, said the firm. However, since the industry typically adds 35 percent to 40
percent of its subscribers in the holiday season, price decreases should be viewed as a net 7-percent decrease, in light of
the 6-percent price increases posted in the less competitive third quarter, said Robinson-Humphrey.
The survey, a
quarterly study of wireless pricing in markets where personal communications services operators have begun service,
found the average PCS pricing discount relative to cellular service ranged from a 13.2-percent premium to a 10.4-
percent discount, depending on the plan size.
“We believe that certain carriers were more aggressive in the
quarter than others due to their desire to target the mid-level consumer market segment, leading to the most significant
price declines in those plans,” said Perry Walter, wireless analyst with Robinson-Humphrey.
In 30 survey
markets where at least two PCS carriers offer service, the average PCS discount to cellular was 2.2 percent, 8.7 percent
and -15.8 percent (premium), respectively, for the low-end, mid-level and high-end plans. Price changes in these
markets since the company’s last survey in September, ranged from a 10.2-percent increase to a 16.9-percent
decrease.
“We are forecasting fourth quarter declines in cash cost per subscriber to average 2.6 percent
sequentially and 37.3 percent on a year-over-year basis,” said Walter. “Thus, cash costs continue to decline
faster than pricing (18.9 percent) on a year-over-year basis, albeit not on a sequential basis. We believe that this is
because of the extreme seasonality in the fourth quarter.”
Some trends the survey found in the fourth quarter
include:
Newer bundled minute plans that feature long-distance and have most roaming charges included are
becoming more prevalent. Companies appear to be migrating customers to larger and more expensive plans with these
types of enticements, noted Robinson-Humphrey.
More offerings that offer discounts on residential long-distance
service for customers that sign up for wireless service from companies like Ameritech Corp., Alltel Corp. and AT&T
Wireless Services Inc. This trend is likely to continue, said the firm.
The addition of large buckets of off-peak
minutes for free or for a small monthly fee.
The survey does not address long-distance or roaming prices, which is
the latest battleground on pricing wars, said the firm. AT&T Wireless, Sprint PCS, Bell Atlantic Mobile, AirTouch
Communications Inc. and GTE Wireless are among the wireless carriers that have introduced one-rate type
pricing.
“These plans have garnered a great deal of attention lately, and our survey shows that the carriers are
taking advantage of this distraction to target other segments of the rapidly growing wireless market,” noted
Walter.
