Overall wireless pricing has decreased between 4.4 percent and 20.3 percent in the United States since the end of the second quarter, according to a survey conducted by Robinson-Humphrey Co. L.L.C.
“I think the reason for that is some of the cellular carriers are now reacting to the PCS pricing plans and offering plans with larger numbers of bundled minutes,” said Perry Walter, a telecom analyst with Robinson-Humphrey.
Of the four regions studied by Robinson-Humphrey, the West logged price decreases of as much as 33.9 percent during the third quarter, the largest decrease of any of the regions. The heaviest discounts came from cellular providers, particularly AirTouch Cellular and AT&T Wireless Services Inc., said the company.
In many markets, pricing declines in mid- and high-level plans have been driven by cellular companies dropping prices to adjust to price levels established by personal communications services carriers. The decline also is attributable to both cellular and PCS carriers offering large amounts of bundled minutes for a fixed price, a promotional trend initially used mainly by PCS carriers to attract subscribers to their service.
“The key here is understanding why,” said Walter. “I think what we’re seeing is more bundled-minute plans, and in particular more plans with 400, 500 or 1,000 minutes for one low rate. Whereas in the past, we had one or two carriers doing that in a market, now you’re having two, three, sometimes four carriers doing those plans, and that lowers the overall pricing.”
According to the survey, PCS companies offer promotional bundled-minute packages as a means to increase brand awareness and compensate for lack of coverage, while cellular carriers are offering attractive pricing packages as a defensive maneuver to retain their more lucrative customer bases.
“What we’re really seeing is that the average PCS usage is somewhere in the 300-400 minute range. If that’s the case, and you put out a 1,000-minute plan, most people aren’t using those 1,000 minutes,” said Walter. “I think the carriers realize that that’s a promotional thing that’s going to get people’s attention, but that they’re not going to incur the costs associated with all those 1,000 minutes, such as interconnect costs.”
While overall prices have dropped during the quarter, pricing differences between cellular and PCS have narrowed as many PCS carriers have modified their deeply discounted plans, said the report.
Sprint PCS scrapped its promotional plans that included 1,500 minutes for $75. The company now is offering new dime-a-minute plans, which include 400 minutes for $40 or 600 minutes for $60. However, despite the higher per-minute prices, Sprint’s service still is offered at a discount to cellular in most markets, said the survey.
Powertel also abandoned its deeply discounted pricing plan of 60 minutes for $10 in favor of plans that feature 10-cents-per-minute offerings.
Although pricing differences between PCS and cellular have narrowed, PCS prices still remain at a discount of between 3.5 percent and 14.4 percent to cellular prices. The PCS discount to cellular pricing was between 14.5 percent and 18.2 percent at the end of the second quarter.
While difficult to compare pricing plans from several companies, Robinson-Humphrey said it was able to detect a pattern of three general levels of pricing plans targeted at different sets of wireless users. Those plans are classified as low-end, mid-level and high-end user plans. Those plans targeted specifically to safety users are not included, said the company.
