Price War Seen as Evidence of Wireless Competitiveness
Recent moves by wireless carriers to cuts prices, including Sprint Nextel’s likely move to a $40 pre-paid rate plan for unlimited wireless data, provide additional evidence that the industry is competitive, officials said this week. The topic has been a sore point since the FCC approved the latest version of its annual wireless competition report, which unlike previous reports does not find that the U.S. wireless market is competitive (CD May 21 p1).
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Sprint Nextel’s Virgin Mobile USA plans to roll out unlimited mobile broadband prepaid plans for $40 a month (CD Aug 24 p10) could mean the end of pricing stability, Bernstein Research analyst Craig Moffett said. T-Mobile USA hasn’t publicized any specific pricing for HSPA+ voice and data, a spokeswoman said. The carrier will evolve its service options focusing on simplicity, flexibility and affordability, she said. That includes offering mobile Internet access on text-friendly phones paired with data plans that families can afford, she said.
Sprint’s pricing strategy targets simplicity and value, a spokesman said. Some competitors require customers to pay an extra $29.99 for unlimited data, which is required for smartphone users, for a total of $99.98 per month, he noted. Sprint’s $69.99 monthly unlimited plan includes text, data and calling while on the Sprint network with Sprint’s Everything Data Plan with Any Mobile Anytime, he said.
The only operator that doesn’t appear to be getting more aggressive with wireless pricing is AT&T, said BTIG Research analyst Walter Piecyk. But AT&T still has an exclusive iPhone agreement with Apple for now, he said. Verizon is testing an unlimited Nationwide Talk & Text plan for $69.99 in several cities in California, research firm Current Analysis said. Verizon couldn’t be reached immediately to comment.
That is not the first Verizon Wireless trial to target Sprint, Piecyk said. Verizon Wireless started trials of a new post-paid rate plan in Texas and Louisiana at the beginning of August that offers unlimited calling to any mobile phone on any network and is somewhat similar to Sprint’s Everything Data -- with Any Mobile, Anytime plans, he said. Verizon Wireless also started trials of a new $50 per month unlimited prepaid plan in 11 states in the Southeast that offers unlimited talk and text, Piecyk said. Although these plans are in isolated areas, they underscore analysts’ belief that competition will intensify heading into the second half of the year, he said.
"It shows that this is an incredibly competitive industry and our entire ecosystem is competing for every single customer,” said CTIA spokeswoman Amy Storey.
"Sprint’s price cuts and the new pricing promotions by Verizon Wireless and others are a further indication of the competitiveness of the wireless market,” said Free State Foundation President Randolph May. “Most people understand -- and appreciate -- the competitiveness of today’s wireless marketplace, except perhaps some who inhabit the FCC’s Portals [headquarters] building who, for their own reasons, are looking to downplay competition."
Free Press Policy Director Derek Turner has seen little downward price movement from AT&T or Verizon Wireless, which dominate the data market, he said. Declining prices don’t necessarily mean more competition, Turner added. “What you could be seeing is the impact of declining demand in a recession or you could be seeing a short term push to gain market share."
"There can be little doubt that the wireless industry is fiercely competitive at the retail level presently. However, from a policy perspective, aggressive pricing on voice and mobile Internet products likely will not alone carry the day,” said Jeff Silva, analyst at Medley Global Advisors. “Indeed, as evidenced in its latest Mobile Wireless Competition Report, the FCC’s reference to increased market concentration since 2003 … and the agency’s comprehensive consideration of various inputs and factors throughout the mobile wireless ecosystem suggest the wireless industry -- particularly market leaders Verizon Wireless and AT&T Mobility -- will continue to varying degrees to face exposure on the regulatory front.”