Editor’s Corner—The era of nickel-and-diming wireless customers is back

Carriers have a new pricing strategy. (Mike Dano/FierceWireless)(Mike Dano / FierceWireless)
Mike Dano

For a brief moment, it seemed like wireless was headed toward simple, commodity pricing.

At the beginning of last year, AT&T and Verizon joined Sprint and T-Mobile in offering unlimited wireless service plans. Such plans replaced the metered pricing options that forced customers to keep careful count of their GBs.

Of course, that wasn’t the first time that unlimited pricing was the industry standard. Indeed, prior to the rise of the smartphone, circa 2008, unlimited data pricing was how wireless operators enticed customers onto their new 3G networks.

But unlimited pricing couldn’t withstand the smartphone onslaught. Led by the popularity of Android phones and iPhones, carriers’ data networks creaked and groaned under the weight of smartphone users’ data demands. As a result, operators quickly retired unlimited-data pricing in an effort to both eke out more revenues as well as to limit congestion on their networks.

Then 4G LTE came along and made the situation much, much better for both carriers and consumers. 4G LTE is much, much faster than 3G and can also handle many more customers and much more data. Carriers that were becoming seriously worried that they wouldn’t be able to meet customers’ data demands quickly deployed LTE in order to add additional capacity into their networks.

But, even after moving to LTE, most carriers continued to charge per GB via metered pricing plans. The goal, of course, was to get customers to use more data so that they would pay for more data. But customers were definitely being nickel-and-dimed.

And then the goal posts moved. Suddenly, the game became all about how many GBs you could get for your money. As the months went by, carriers worked to offer bigger and bigger buckets of data, and the price per GB continued to fall.

Finally, at the beginning of last year, the equation reversed itself. AT&T and Verizon in particular decided that their networks could handle the increased usage from unlimited service pricing, and that both their financial situation and the competitive market demanded that they enter the unlimited game.

At that time, it seemed like wireless customers would finally be able to get wireless service for one reasonable price. Just like the wired internet market today, where you pay one simple price for the speed at which you want to connect to the entire internet, it seemed like unlimited wireless service would be available for one price.

T-Mobile even advertised this scenario when it announced its “T-Mobile One” unlimited pricing plan. “T-Mobile One is a radically simple subscription to the mobile Internet. One low price. Unlimited everything. That’s it. It doesn’t get any simpler than that,” the carrier said in 2016.

But it was not to be.

In the pasts few months, it has become clear that AT&T, Verizon, Sprint and T-Mobile are all moving toward a tiered approach to unlimited service. Instead of one price point, each of these carriers is offering two or more prices for unlimited wireless service. Now customers can choose from an unlimited plan that streams HD video or one that doesn’t. Or an unlimited plan that includes Netflix or one that doesn’t. Or one that offers international roaming or one that doesn’t. Or one with throttled connection speeds or one that goes as fast as possible.

This tiered approach to unlimited pricing doesn’t come as a surprise; it’s clearly an attempt by wireless operators to entice customers onto their network with low prices, and then to get them to pay just a little more for goodies and extras. And it’s a strategy employed across a wide range of services and industries: just look at Netflix’s own tiered pricing strategy that offers more streams and better quality for just a few dollars per month more.

But the most important takeaway from this latest nickel-and-diming trend is that wireless operators don’t want to put a commodity price on wireless. They don’t want their service to fall into the same bucket as a utility like water or gas or insurance. And as a result, they’re working to pack their services with incentives to bolster revenues and raise profits.

The only real question that remains is whether this scenario will change in the coming months and years as operators launch 5G services. —  Mike | @mikeddano