Bell Atlantic Mobile is expected to announce next month rate plans competitive with AT&T Wireless Services Inc.’s Digital One Rate plan-a move that could trigger price wars for valuable high-end users.
Sources indicate BAM’s airtime plans will eliminate roaming and long-distance charges like AT&T’s plans, with lower per-minute rates than AT&T’s. The AT&T Digital One Rate plan, announced in May, includes three pricing options: 600 minutes for $90, 1,000 minutes for $120 and 1,400 minutes for $150. Those rates equate to per-minute airtime rates of between 10 cents and 15 cents.
BAM confirmed a pending announcement.
“Responding to pricing changes in the wireless market is an everyday occurrence,” said Jim Gerace, vice president of public relations with BAM. “Bell Atlantic Mobile is not in the business of responding, but prompting a response.”
Analysts believe all major carriers eventually will have to follow suit to stay competitive with high-end users.
“I expect all major carriers will have integrated pricing plans by year-end 1998. Failing to do so would make them non-competitive, especially for high-powered business users,” said Bob Egan, research director with Gartner Group in Stamford, Conn.
Cellular carriers, in particular, are working aggressively to hang on to high-end users because they don’t want to tolerate the low margins produced by lower-usage customers, said a recent report from Toronto Dominion in New York. Most carriers already are at or below the per-minute level of AT&T’s plans, but have yet to include roaming and long-distance charges in their plans. Cellular One in some markets recently introduced flat-rate roaming.
“This is another pricing tool for a particular segment of the market. It could very well be the dynamic we are going into,” said Perry Walter, telecom analyst with Robinson-Humphrey Co. “Carriers are trying to lock in high-revenue subscribers.”
Herschel Shosteck of Herschel Shosteck Associates Ltd. in Wheaton, Md., said the competition will become more ferocious when personal communications services carriers build out to provide more comprehensive roaming.
Christopher Larsen, senior wireless analyst with Prudential Securities in New York, said AT&T’s $90 plan guarantees the carrier above-average revenue per user and the cost per-minute of providing the service is low compared with the fixed costs of providing service. Long-distance rates have a limited cost impact since carriers buy them wholesale, he said. In addition, the low per-minute rates mean customers will begin displacing wireline service with wireless service.
One tricky area for BAM could be the roaming charges it will have to eat in order to offer a no-roaming plan. BAM doesn’t have the leverage of a national footprint like AT&T and Sprint PCS do.
“This kind of pricing speaks volumes for being a nationwide carrier. It makes it difficult for regional carriers,” said Larsen. “If roaming usage increases, you wind up having to pay that … It could have a negative impact on margins.
Carriers today only receive 10 percent of their revenues from roaming, said Larsen, but customers like to know they have the ability to roam without having to pay inflated rates.
“You don’t necessarily have to be a national player, but you need to give the perception that you’re nationwide,” said Larsen. “This could increase the value of the GSM Alliance.”
The GSM Alliance, formed last summer as a way for U.S. and Canadian Global System for Mobile communications operators to leverage themselves under one nationwide brand, is looking at ways to charge national rates to selected companies. Most GSM operators are charging around 50 cents per minute for roaming, but they have the economic flexibility to charge low rates since they buy minutes at low wholesale prices from each other.
Omnipoint Communications Inc. will announced today new rate plans that will begin in all Omnipoint markets Sept. 1. The company, which has long avoided bundling minutes in its plans, will offer bundled-minute options that include a plan for $300 per month for unlimited minutes (See related story on p.3) For an extra fee, customers can upgrade their bundled-minute plans to be used for domestic long distance as well as local calls. Reduced roaming rates will allow customers to roam for 49 cents per minute.
