How long will AT&T's competitors resist tiered pricing plans?

Lynnette Luna

Something strange has happened. It's been more than a month since AT&T (NYSE:T) changed its smartphone data pricing plans from an unlimited structure to a tiered model, and no other operator has followed suit. Typically when one operator makes a dramatic change, the others fall like dominoes.

Of course, copycat moves usually happen when an operator makes a dramatic change that is perceived as attractive to end users. That jury is still out on tiered pricing plans--which are still perceived as a step backward for consumers and more beneficial to operators' economics.

Verizon (NYSE:VZ) quelled rumors this week that it plans to introduce tiered pricing plans in the near term, while Sprint and T-Mobile have said they have no plans for introducing tiered services either. Verizon has indicated tiered pricing will come when LTE is introduced later this year.

"You have not seen us rush out to make any kind of a change," Verizon Communications CFO John Killian said during Verizon's earnings conference call last week, when questioned whether Verizon will follow AT&T Mobility to a tiered-pricing approach. "We will continue to monitor the situation, of course, and look at opportunities that will say what is the best equation for us to drive long-term shareholder value, and we will be very focused on that. I cannot say enough, though, about the opportunity we see ahead given where we are today with smartphone penetration."

Meanwhile, AT&T talked up the attractiveness of its tiered pricing plans during its second-quarter call. AT&T CFO Rick Lindner said that early results from the company's move to tiered data pricing plans have been encouraging. In particular, he said the company had expected a lot of customers to migrate to the lower price point ($15 per month for 200 MB of data) but a large portion migrated to the $25 per month for 2 GB of data plan. In addition, he said AT&T is seeing benefits from lowering the point of entry so customers can move into the integrated device category and try data services. "We believe over time they will migrate to higher-tiered plans," he said.

But interestingly, AT&T's competitors have not sought to differentiate themselves by promoting their unlimited plans, which perhaps indicates they are watching to see how effective AT&T might be in attracting new users. As such, I don't believe operators plan to ever point out that difference. They too would economically benefit from moving to a tiered plan, and they are letting AT&T be the test operator for it. I suspect they will watch AT&T's results for the next six months or so and incorporate similar 3G plans if AT&T successfully resonates with consumers.--Lynnette

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