In 2022, Verizon, T-Mobile, and AT&T are each running a lot of promotional activities on flagship devices, keeping the number of new subscribers at a high level and the churn rate relatively low. AT&T and Verizon also raised service plan prices as the two airlines try to offset the cost of rising inflation.
But in late 2022, the advertising game is starting to change. In addition to the heavy promotions for devices, carriers have also started discounting their service plans.
T-Mobile is promoting service plans that offer four lines of unlimited data for $25/month per line and four free iPhones.
Verizon has a similar promotion in early 2023, offering an unlimited starter plan for $25/month with a guarantee to stay at that price for three years.
In a way, these subsidized service plans are a way for operators to attract subscribers. But the promotions are also a response to changing market conditions, with cable companies stealing subscribers from incumbent operators by offering cheaper service plans.
At the heart of Spectrum and Xfinity: pricing, bundling, and flexibility
In the fourth quarter of 2022, the cable network operators Spectrum and Xfinity recorded 980,000 new customers in the postpaid telephone network, far more than Verizon, T-Mobile or AT&T. Cable operators' low prices resonated well with consumers and boosted subscriber numbers.
At the time, T-Mobile was charging $45 per month per line for its cheapest unlimited plan, while Verizon was charging $55 per month for two lines for its cheapest unlimited plan. Meanwhile, the cable operator is offering its Internet subscribers an unlimited line for $30 a month.
By bundling multiple services and adding more lines, the deals get even better. Savings aside, the key message revolves around the cable operator's "no-obligation" offer. Consumers can change their plans on a monthly basis, which removes the fear of commitment and gives users the flexibility to switch. This helps consumers save money and tailor their plans to their lifestyles in ways incumbent airlines can't.
New entrants are increasing wireless competition
With the success of their Xfinity and Spectrum brands, Comcast and Charter have established a model that other cable companies are quickly adopting. Cox Communications announced the launch of its Cox Mobile brand at CES, while Mediacom also applied for a trademark for "Mediacom Mobile" in September 2022. While neither Cox nor Mediacom have the scale of Comcast or Charter, as the market expects more entrants, and there could be more cable providers to be continued by operators if they don't get used to siphoning off users.
Cable companies offer superior flexibility and better pricing, which means operators need to adjust their approach to get better value from their service plans. There are two approaches that are not mutually exclusive: Network operators can offer service plan promotions or hold prices constant, but add value to their plans by adding subscriptions to streaming services and other perks that cable companies are unable to to correspond to the means or the magnitude. Either way, service costs are likely to rise, meaning the money available for device subsidies could shrink.
Until now, hardware subsidies, service bundling, and value-added services with premium unlimited plans have been the key factors driving the migration from prepaid to postpaid. Given the significant economic headwinds operators are expected to face in 2023, including rising debt costs, subsidized service programs could mean a move away from device subsidies. Some incumbents have already made subtle hints to end the massive equipment subsidies that have persisted for the past few years. This transition will be slow and gradual.
Meanwhile, airlines are turning to promotions for their service plans to defend their turf, especially at a time of year when churn is accelerating. Because of this, both T-Mobile and Verizon are offering limited-time promotional offers on service plans, rather than permanent price reductions on existing plans. However, airlines will be reluctant to offer budget service plans as there is little appetite for price competition.
Ever since T-Mobile and Verizon started using Serviceplan Ak
Previous： SOFTEL was invited to Exhibit at ANGA COM 2023
Next：SOFTEL Plan to Participate in 2023 INDONESIA INTERNETEXPO &SUMMIT