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The sudden and ubiquitous availability of unlimited calling plans descended on the consumer market with a cascading domino effect. Not long after Verizon Wireless announced unlimited voice calling for about $100 per month, AT&T Mobility quickly followed suit. T-Mobile USA Inc. then chimed in, announcing that it would cater to its text-heavy subscribers by throwing unlimited text and instant messaging into the mix for the same flat rate. Finally, like a calling circle, the pricing cap returned to Sprint Nextel Corp., which might have actually incited the first pre-earthquake tremors with initial consumer trials of unlimited regional pricing.
The upsell
While some in the industry consider unlimited calling to be the first shot fired in a carrier-led war of attrition that will destroy the voice-revenue base of operators, others see them as a psychological incentive that can be used to persuade subscribers in lower-tier calling plans into upgrading their service to take advantage of unlimited calling. However, a look at the demographics of consumers using more than 1,501 minutes per month reveals that unlimited calling plans are really just another offering operators can use to retain their best customers.
According to NPD data, in 2007 about 6% of U.S. consumers were subscribed to calling plans of 1,501 minutes or more. Of course, this percentage varied depending on the carrier. Verizon Wireless, which got the ball rolling, may have foreseen the adverse effects that unlimited calling might have on its rivals. The nation’s second-largest wireless carrier had fewer than 5% of its consumers using this many minutes, which was the lowest among the four major carriers. By comparison Sprint Nextel, the carrier with the largest percentage of customers at this level, had more than 10% of its users using this many minutes. Verizon Wireless’ move struck hardest against its most vulnerable competitor.
Targeting the high-end user
Offering a break to these high average revenue per user customers can pay dividends to operators, since these consumers have proven vocal in more ways than one. In fact, 10% of them indicated they would “probably” or “definitely” switch carriers within three months. This was higher than consumers on average.
Indeed, cultivating a favorable shift when subscribers are ready to switch carriers is a key desired outcome of these unlimited plans. While the highest-volume callers did not have higher annual average incomes than others, they were disproportionately younger. Forty-five percent of these consumers fell between the ages of 18 and 34, as opposed to only 33% of all subscribers.
These younger subscribers were also far more likely than the average wireless subscriber to rely on their cellphone as their primary means of communication — 56% said that they used their cellphone most, even though they had a landline; 29% used their cellphone as their only phone, versus 18% among all wireless subscribers.
Boost for data
And that brings us to the long-term payoff in unlimited calling: Specifically, the progression of carrier revenue from voice to data. While only 40% of consumers using fewer 1,500 minutes or less per month had a data plan, 54% of those using 1,501 or more minutes per month had one. Holding on to these more profitable younger customers long enough to have them adopt emerging data services will ultimately help operators win the race to the future, instead of losing the race to the bottom.
Ross Rubin is director of industry analysis at NPD Group Inc. Questions or comments about this column? Please e-mail RCR Wireless News at rcrwebhelp@crain.com.
