Mother Of All Price Wars?
Within 24 hours of each other this week Verizon, AT&T, and T-Mobile all announced unlimited nationwide calling plans that start at $99.99. T-Mobile’s plan includes text messaging as well.
The analysts and the journalists and Wall Street all cried ‘Price War‘ and Verizon’s stock price dropped 10% before recovering. We think they were all overreacting, to say the least.
There’s a big difference between the advertised price of the voice plan and the total amount of the bill.
The average total bill in the US is about $60 per line ($53 according to the CTIA, plus taxes). All of the coverage so far can be summarized as “$100 is way more than $60, but it must still affect a whole lot of people, right?” Wrong.
$60 includes the voice plan, text messaging, email, web browsing, ringtones, games, premium text messages, 411, international roaming, activation fees, equipment protection, roadside assistance, state and federal surcharges, late fees, just-for-the-hell-of-it fees, and taxes. Voice costs only $40 per line on average including roaming and overage charges.
So how many people spend $100 or more on voice every month? According to Verizon, one half of one per cent of all their subscribers. Do they contribute a disproportionate amount of revenue? No. If every single one of them switched to the new plan, Verizon’s revenue would drop by one third of one per cent.
If rumors of a $60 unlimited plan from Sprint are correct, all bets are off. But $99.99 is a phony war.
UPDATE 2/28: Sprint comes in at $89.99 for unlimited voice and a bundle of data services for another ten bucks. On the quarterly conference call, CEO Dan Hesse admits that the number of subscribers spending $100 or more per line is in the low to mid single digit percentage range. (Or in English, less than 5%.) Nothing to see here, move along.
[...] for example, Debi Jones’ post at the GoMo blog). Skydeck’s Jason Devitt argues in Mother Of All Price Wars? that journalists and Wall Street all cried wolf, and he explains [...]