Price war sign of shifting priorities: New plans show increased attention on data

The recent adjustments made to rate plans by Verizon Wireless and AT&T Mobility are good news for customers that talk a lot each month, and do nothing else with their cellphone. They will see their monthly bills drop by 30%, a significant sum in today’s economic climate.
However, for those that use their mobile device for more than just talking, and by that I mean those that send text messages, check their e-mail or watch YouTube clips, that savings on the voice side could be eaten by additional charges on the data side.
In many cases where consumers had the choice to add messaging or data packages to their rate plans, they are now required to add such packages with some devices. So, while a customer may be saving $30 on the voice portion of their bill, the required packages will reduce those savings. For a customer selecting one of the carrier’s “3G Smartphones” that unlimited voice plan at $70 becomes $100 with the required data package and $120 with the required data package and the basic messaging package. Still significantly cheaper than bundling all of those services before the rate plan changes, but not quite the level of savings headlined by the drop in the voice component.
For wireless carriers these changes make sense as they realize the mobile space is changing from a voice-centric form of communications to a broader-based model that has consumers spending as much time, if not more, using their fingers to communicate and the devices embedded capabilities to access information.
In a recent Business Week story, Credit Suisse analyst Johathan Chaplin was noted as saying that Verizon Wireless may sacrifice $540 million in voice revenues with its latest rate plan changes, but that those same changes will generate an additional $630 million in data plan sales. The same story cited a JP Morgan report that showed only about 2% of wireless subscribers will see their monthly wireless bill shrink following the changes.
The changes also had an impact on Sprint Nextel Corp., which saw its stock price dip following the rate plan changes as investors feared the carrier would lose a portion of the pricing advantage it had commanded over its larger rivals. Sprint Nextel was quick to point out that customers on its Simply Everything plan would still save $20 per month compared with similarly optioned plans from Verizon Wireless and AT&T Mobility, and even more if they selected navigation services from the larger carriers that is standard in Sprint Nextel’s plan.
Investment firm Bernstein downgraded its rating on the carrier from “Market Perform” to “Underperform” following the rate plan changes. Others noted that they expected Sprint Nextel would have to adjust its plans to continue to show a significant price advantage compared with Verizon Wireless and AT&T Mobility.
T-Mobile USA Inc., which is owned by German telecom giant Deutsche Telekom AG, recently announced its own rate plan changes that included no-contact plans with unlimited voice calling at $50 per month.
On the increasingly competitive no-contract side, Verizon Wireless’ new offerings allow customers to bypass a contact on the unlimited calling offer for an additional $5 per month. (That offering is still $30 more per month for the unlimited calling, messaging and limited data package provided by Tracfone Wireless Inc.’s Straight Talk offering that uses Verizon Wireless’ network and includes the Verizon Wireless name on the box of devices using the Straight Talk service.) AT&T Mobility last year rolled out an option for its GoPhone plans that provides unlimited calling for $60 per month. Sprint Nextel’s Boost Mobile division recently added CDMA devices to its all-inclusive unlimited offering for $50 per month.
Those changes have impacted regional operators like MetroPCS Communications Inc. and Leap Wireless International Inc. Both carriers offer similar, no-contract plans that include unlimited calling, messaging and data services at around the $60 per month price point, but lack the coverage and marketing might as well as device depth behind Verizon Wireless and AT&T Mobility’s plans. Analysts noted the increased pricing pressure could again force the two operators back to the bargaining table to discuss a possible merger.