Carriers shift marketing focus to their own customers — Moore

Sign seen at AT&T store visited by Wave7 Research on June 18, 2021. (Wave7 Research)
Jeff Moore Industry Voices

Wireless competition is not what it used to be. There’s a timeline. Sprint was acquired by T-Mobile in April 2020. In October 2020, AT&T began providing its best deals for all customers, basically providing flagship smartphones in return for signing up for years of unlimited data.

AT&T reported 595,000 postpaid voice adds in its first quarter 2021, powered by churn that is at an all-time low.  Excellent results.

Verizon? The carrier lost 178,000 postpaid voice customers during the same quarter. Then in June, Verizon also started providing its best deals for all customers, basically providing its top phones at $0/month. This is not just a June promotion, as the offer is continuing into July.

T-Mobile has not followed suit, but the carrier is increasingly pushing its most expensive plan, Magenta Max, which is now required for certain offers. So, all three carriers are working hard to get customers to adopt high-end unlimited plans, getting more revenues from each customer.

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Having acquired Sprint, T-Mobile has a much larger customer base to defend. Comcast and Charter may be cable companies, but their Xfinity Mobile and Spectrum Mobile units ironically are in the position of being upstart competitors that are aggressively seeking share.

Longer equipment installment plans (EIPs)

AT&T in June replaced its 30-month EIP with a 36-month EIP.  Not long ago, AT&T customers had an option of a 24-month plan or a 30-month plan, so the evolution is clear at AT&T.

Verizon uses a 24-month EIP for all phones, but there is an option of a 30-month EIP for phones priced at $800 and above. I would not be surprised if Verizon lengthened its EIP, as AT&T has done. T-Mobile uses a 24-month EIP and the 18-month lease that many Sprint customers use is not likely to endure.

Longer upgrade cycles are driven in part by reduced differentiation between phone models. All top smartphones are black slabs of glass with high speeds, good screens, good cameras and improved charging options.

Hello, 2010!

Remember the days of $199 iPhones and two-year contracts? The carriers are moving in that direction. It is anathema to call an EIP a contract, but the truth is that customers are on the hook. Customers who leave the carrier before the EIP period ends will usually owe the carrier for the “free” phone. It is a contract, in effect.

Now, AT&T and Verizon face the upfront cost of providing an iPhone or a flagship Galaxy device at $0/month. At AT&T, customers have to sign on the dotted line for 36 months of unlimited service. A customer signing up today will still be paying by the month for an unlimited plan into July 2024. A Verizon customer who takes advantage of the offer will be paying for a premium unlimited plan into 2024 or July 2023. Essentially, both carriers have calculated that higher service revenues and lower churn will outweigh higher device subsidies.

Nirvana of low competition?  Not quite

In mid-2021, the market is less competitive, with fewer switchers than ever. Is this the new normal? No, it isn’t. 

In April, Comcast announced family unlimited plans. Suddenly, a family of four can get unlimited data for $120/month, versus $160/month previously. This is a significant discount. Spectrum Mobile is considering similar changes, Light Reading reported in May.  And it looks like Cox is planning a wireless launch of its own, FierceWireless reported in 2020. The cable company has posted quite a few wireless-related job postings.

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The cable companies are doing everything that needs to be done to compete. Hundreds of stores have been built, just as national carrier store counts are declining. Xfinity Mobile and Spectrum Mobile are spending heavily on advertising. New efforts are afoot, such as Spectrum Mobile’s recent launch of Apple Watches.

Lest we forget, Dish Network has an obligation to build a network that will cover at least 70% of the U.S. population by June 2023. I’m skeptical about Dish having a major impact, but it does look like there will be a fourth national network.

Nirvana of low competition?  Not quite

In mid-2021, carriers are more focused on base offers than on switcher offers. EIPs are getting longer. Upgrade rates are greatly lower than in the past, while churn is at an all-time low. We’ve reached competitive nirvana. Right, cable companies?

Jeff Moore is Principal of Wave7 Research, a wireless research firm that covers U.S. postpaid, prepaid, and smartphone competition.  Jeff has 25 years of telecom industry experience, including 13 years of competitive intelligence work for Sprint. Follow him on Twitter @wave7jeff.

Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by FierceWireless staff. They do not represent the opinions of FierceWireless.