Cost of wireless service falls 13%, biggest decline in 16 years: Labor Dept.

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The move to unlimited pricing appeared to be reflected in wireless carriers’ first-quarter results.

As pointed out in a new Wall Street Journal article, the cost of wireless services declined by 12.9% during the past 12 months. And that’s the biggest drop the U.S. Labor Department has recorded during the past 16 years.

The culprit? The U.S. wireless industry’s wholesale return to unlimited wireless plans.

In a detailed article on the topic, the Wall Street Journal reported that the cost of wireless service plans fell 7% in March and an additional 1.7% in April. When comparing April data against the same month last year, the publication reported that wireless service prices have declined by almost 13%. The WSJ cited the Labor Department’s consumer price index for the numbers; the Consumer Price Indexes (CPI) program “produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services,” according to the agency.

An economist at Capital Economics explained that the unlimited “price war” among wireless service providers was primarily to blame. Indeed, T-Mobile and Sprint have long offered unlimited wireless services, but AT&T and Verizon earlier this year matched those plans with unlimited wireless data offers of their own.

And the battle continues. As noted recently by Wave7 Research, Sprint now is offering five lines of unlimited wireless data for just $90 per month. That offer, available on the carrier’s website, essentially prices the first line of service at $50 and the second line at $40, and the remaining lines for free. The carrier’s offer is applicable for the next year, when prices will increase to $60 per month for the first line, $40 per month for the second line, and $30 per month for lines 3-5. Sprint’s unlimited data offer costs far less than what T-Mobile, Verizon and AT&T are charging for unlimited service.

Indeed, the wireless industry’s move to unlimited pricing, and the resulting decline in the cost of wireless service, in part contributed to an overall decline in the Labor Department’s consumer-price index in March—the first such decline in more than seven years. The WSJ noted that other factors pushing that figure down include a glut of used cars and a deceleration in medical inflation, but Capital Economics attributed close to half of the decline in core CPI inflation this year to the falling cost of wireless service.

That appeared to be reflected in wireless carriers’ first-quarter results. “U.S. had a rough start to 2017 with several indicators turning negative for the industry,” wrote industry analyst Chetan Sharma in his recap of the wireless industry’s situation in the first quarter. “The U.S. mobile data services revenue has seen QoQ growth for 17 straight years until Q1 2017 when it saw its first negative growth for the quarter. (Q1 is generally a down quarter but for the first time the revenue growth dipped below zero).”