Cellular Price War Continues on New Front
Mobile broadband has been one of the greatest developments in this century, but something may need to change to keep this train rolling.
The FCC's decision to slap AT&T with a $100 million fine, the largest ever levied by the agency, for throttling back data capacity for its unlimited customers (of which I am one) is front-page news across the country this morning. However, for those of us on the front lines in wireless, it is just one more symptom of the ongoing financial crunch being felt by the mobile operators.
A bit of background: When AT&T stopped offering unlimited plans in 2010, it did allow customers to keep the plans if they already had them. However, AT&T reportedly cut data rates from the advertised 5 to 12 megabits-per-second download speed to 512 kilobits per second after subscribers with those unlimited plans hit 5 gigabytes of usage in a billing period. As a result, AT&T faced the FCC's scrutiny, and is facing a suit filed by the Federal Trade Commission in San Francisco seeking compensation for customers who were misled by AT&T's advertising claims.
Verizon also has phased out unlimited plans for new subscribers while smaller rivals Sprint and T-Mobile both have indicated they may phase them out as well.
Back in February, the FCC reclassified mobile broadband as a regulated service, opening the mobile operators to closer regulatory scrutiny. The agency had battled with Verizon last year over its plans to throttle data rates in congested areas; the company eventually dropped the plan. Sprint, too, had been throttling data capacity for its heaviest users, but ceased the practice last Friday, June 12, when the new Net neutrality rules went into effect.
Mobile operators are under pressure on all sides. On the revenue side, the operators are embroiled in a knockdown, drag-out battle over prices. In the last few cellular contracts I have worked on, the customers came out with savings in the 30 to 40% range. In one case, a customer with 65% of its bill coming in the way of international roaming charges saw those roaming rates cut by 75%!
On the regulatory front, besides increased scrutiny from the FCC, two major mergers -- one between AT&T and T-Mobile and the other between T-Mobile and Sprint -- have been squashed in the past few years. Now T-Mobile, under CEO and industry gadfly John Legere, is looking at a possible hookup with Charles Ergen's Dish Network.
If that's not enough, Google is talking about a Wi-Fi-first MVNO service modeled on the Republic Wireless' offering, and CATV operator Cablevision has launched its Freewheel Wi-Fi-only unlimited voice/data/text mobile service at a price of $9.95 per month for Cablevision subscribers ($29.95 per month for non-subscribers).
Mobile broadband has been one of the greatest developments in this century, and has radically altered both consumer and business user expectations of what's possible while mobile. Expectations continue to rise, and subscriber growth and technological advances have allowed the carriers to stay ahead in the race. However, with the regulators clamping down and the realities of a highly competitive market for a much sought after commodity (yeah, I said "commodity"), something may need to change fundamentally to keep this train rolling down the track.