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Analyst: AT&T, Verizon Face Uncertain Future
As the SMS Cash Cow Heads Out to Pasture
A few years ago, you might recall that Sanford Bernstein analyst Craig Moffett declared that despite the SMS cash cow and soaring voice and data profits, the wireless industry was supposedly "collapsing," and that the whole industry was "grinding to a halt." Three years later and Moffett is still apparently trying to send incumbent wireless company stocks tumbling, telling Business Week that despite their soon domination of close to 80% of the retail market (not to mention their dominance of special access), both Verizon and AT&T are in trouble. Why? Upgrade phobic Moffett doesn't like the fact they're pouring money into networks since that slows investor returns, and he worries about the death of SMS:
quote:
Problem is, that redoubt of profitability is now subject to what Moffett calls the threat of "bandwidth arbitrage." Put simply, with smartphone apps users can now easily send and receive text messages without paying the telcos for the privilege. These apps, including ones by Facebook and GroupMe, use phones’ data capabilities for texting, reducing the need for subscribers to buy a traditional texting plan. A new messaging feature from Apple (AAPL), expected to be released in the company’s next software update, will bake similar functionality directly into the iPhone. It’s "a very real threat to Verizon and AT&T," says Moffett.
While the death of the voice minute and SMS is a very real revenue issue in the face of smartphones, push IM clients, and open networks -- both AT&T and Verizon have responded by raising rates on mobile broadband and eliminating unlimited mobile data plans, something Moffett has championed for years. There's also never a shortage of new fees to impose, from per byte penalties to additional levies for tethering. Business Week also leaves unmentioned that particularly with AT&T's acquisition of T-Mobile, both AT&T and Verizon enjoy regulatory capture and dwindling competition, which will help diminish the impact of (r)evolutionary threats.
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pnh102
Reptiles Are Cuddly And Pretty
Premium Member
join:2002-05-02
Mount Airy, MD

pnh102

Premium Member

BS

Overage fees from capped data plans will more than make up for any loss of revenue from SMS.

spewak
R.I.P Dadkins
Premium Member
join:2001-08-07
Elk Grove, CA
·Consolidated Com..

spewak

Premium Member

Re: BS

said by pnh102:

Overage fees from capped data plans will more than make up for any loss of revenue from SMS.

Pretty much what I was going to post. First, Moffett is an idiot of grand proportions. Second, the big guys will figure out ways to squeeze subs. Regardless!
firedrakes
join:2009-01-29
Arcadia, FL

firedrakes

Member

Re: BS

moffett is a idiot paid well to spreed lies

ITALIAN926
join:2003-08-16

ITALIAN926 to pnh102

Member

to pnh102
Why does this website continue to mention this mans name? My Grandpa Jim is willing to contribute his predictions as Craigs replacement.

kataan
Premium Member
join:2003-04-22
Greenacres, WA
Buffalo WZR-1750DHPD

kataan

Premium Member

Re: BS

said by ITALIAN926:

Why does this website continue to mention this mans name?

I am not sure why but every time I hear his name I get physically ill! At least Karl did us all a massive favor and did not use his pic on the article.

This guy has done more to raise my cell bill than I will ever know, or ever want to know. I just hope he has read Dante Alighieri: Divine Comedy just so he has his tour guide memorized for the trip, witch is will undoubtedly will take:D At least I an take comfort he will rest in the 9th level of hell a freeze for all eternity .
richardak
join:2001-07-08
South Texas

richardak

Member

They already overcharge for other things

I pay over $220/mth for 3 phones on Verizon Wireless, $90 of that just for their data plans. I pay AT&T $30/mth for each of my 2 iPads. That is $150 for data on 5 wireless devices that don't use those data plans very often, they are using WiFi most of the time. They will continue to make plenty of profits with the gouging of the consumer for these data plans.

FFH5
Premium Member
join:2002-03-03
Tavistock NJ

FFH5

Premium Member

Migration from feature phones to smartphones bring in lost $

As more and more customers switch from feature phones with $10/mo SMS plans to smartphones with required $30 mo average cost data plans, the wireless providers are coming out on the positive side of the switch.
flycuban
join:2005-04-25
Homestead, FL

flycuban

Member

Re: Migration from feature phones to smartphones bring in lost $

And the sad part is soon, you will NOT have a choice of buying a regular phone vs. a smartphone.
en103
join:2011-05-02

en103

Member

Re: Migration from feature phones to smartphones bring in lost $

There are VERY FEW devices (at least at AT&T) that are basic enough to not require a data plan or an SMS plan.

At one time all AT&T phones (except Blackberry) did not require a $10-25 / month add on of SMS or data. Now, I think its primarily GoPhones that are except from DATA/SMS requirement.

saladbar15
join:2009-07-18
Brighton, MA

saladbar15

Member

Re: Migration from feature phones to smartphones bring in lost $

It's true. We were in a very large AT&T store (one of the Experience stores) and this is what the guy said to us: "All of the phones on that wall and on the floor are smartphones, requiring a data plan. The phones on that area of the wall are messaging phones, and those few phones over there are basic phones."

As time is going on the basic phones are just fading away (unless you get a pay as you go setup).

I still miss my old Nokia 5180. That was a good phone.
Derideo
join:2011-07-25
Washington, DC

Derideo

Member

Re: Migration from feature phones to smartphones bring in lost $

As a senior, yes this is very concerning. As a senior that can only afford a basic SVC tracfone, basically designed for fogeys such as I, it's even more concerning. With the onset of 4G, rendering old basic devices redundant I'm going to be forced into buying a much more expensive, technical device than what I want, or need. And the more stress is put on so said spectrum, the larger the chances that more spectrum wil need to be freed up from antiquated technology. I do understand that it's not technology undermining the budget minded, it's wireless service providers controlling spectrum, that aren't interested in going the mile for low-end users...that still now constitute 50% of the market.
BiggA
Premium Member
join:2005-11-23
Central CT
·Frontier FiberOp..
Asus RT-AC68

BiggA

Premium Member

Re: Migration from feature phones to smartphones bring in lost $

Tracfone isn't going anywhere. They'll go to 3G when it becomes dirt cheap. Until then, there's that last 5mhz of GSM in the CLR band, and that's going to be around for a LONG time. There's just too many GSM phones out there to get rid of it. If anything, over the past few years, regular cell phone service has gotten cheaper, while smartphones have gotten more expensive, but have also become a better value since they do so much more.
Austinloop
join:2001-08-19
Austin, TX

Austinloop to flycuban

Member

to flycuban
I would have to disagree with you. I was able to replace 2 wireless phones (just phones) with 2 new wireless phones (not smart phones, or blackberries.

It is possible and I did it thru my carrier.
BiggA
Premium Member
join:2005-11-23
Central CT
·Frontier FiberOp..
Asus RT-AC68

BiggA to flycuban

Premium Member

to flycuban
They're going to make their money one way or another.

There are two things to consider when saying "there's no smartphones anymore".

1. AT&T has a dumbphone from each form factor, actually several. There's only so many variations on a flip phone, a candybar, and a slider that you need to carry.

2. If you're not using a smartphone, you shouldn't be on AT&T. Dumbphone users should have prepaid, it's a lot cheaper. The only big downside of prepaid is the phone selection, which non-smartphone users obviously don't care about.

carpetshark3
Premium Member
join:2004-02-12
Idledale, CO

carpetshark3

Premium Member

Re: Migration from feature phones to smartphones bring in lost $

said by BiggA:

They're going to make their money one way or another.

There are two things to consider when saying "there's no smartphones anymore".

1. AT&T has a dumbphone from each form factor, actually several. There's only so many variations on a flip phone, a candybar, and a slider that you need to carry.

2. If you're not using a smartphone, you shouldn't be on AT&T. Dumbphone users should have prepaid, it's a lot cheaper. The only big downside of prepaid is the phone selection, which non-smartphone users obviously don't care about.

There's other reasons for a "Smartphone" - You can root it and get rid of all the crap. You can get a faster processor and a better screen.
BiggA
Premium Member
join:2005-11-23
Central CT

BiggA

Premium Member

Re: Migration from feature phones to smartphones bring in lost $

That's not what's being argued here.
Joe12345678
join:2003-07-22
Des Plaines, IL

Joe12345678

Member

just jack up roaming and data fees and make incomeing free

just jack up roaming and data fees and make incomeing free for text to get people who may send 1-2 texts to go from $0 to like $0.25-$1 in text.

I had to block txt as I did not want to pay $0.10-$0.25 for incoming per txt.

ArrayList
DevOps
Premium Member
join:2005-03-19
Mullica Hill, NJ

ArrayList

Premium Member

Re: just jack up roaming and data fees and make incomeing free

there are still plans that charge for roaming?
Bobcat79
Premium Member
join:2001-02-04

Bobcat79

Premium Member

Re: just jack up roaming and data fees and make incomeing free

Ever try to use your phone in Canada? 69 c/min, baby.

ArrayList
DevOps
Premium Member
join:2005-03-19
Mullica Hill, NJ

ArrayList

Premium Member

Re: just jack up roaming and data fees and make incomeing free

ohhhhhhhhhh international roaming.
corinthos
join:2007-10-09

corinthos to ArrayList

Member

to ArrayList
Some people are on old grandfathered plans. Being grandfathered in on an old plan isn't always a good thing. I met a guy who was paying 45 a month bucks for 300 anytime minutes, 1000 nights and weekend. His overages were 45 cents per minute and he goes over by about 50 minutes a month and charged for roaming and is stubborn and refuses to change it.
rradina
join:2000-08-08
Chesterfield, MO

1 recommendation

rradina

Member

Stock Market Doesn't Seem To Work

If it's true that the motivations for these allegations are driven by investor performance, the stock market seems to be getting more dysfunctional every day.

Recently a hedge fund recommended that Microsoft borrow $40 billion dollars to buy back a bunch of its stock and raise its dividend because they are disappointed in their stock results even though the company just broke all-time revenue and profit records.

»www.streetinsider.com/Di ··· 778.html

This kind of thinking has our country suffering under mountains of debt on which it is nearing a default and companies doing stupid things in the name of a bit more profit rather than doing the right thing.

When electronic "day traders" can siphon millions from the market by buying low and selling high after holding a stock for a few hours, there's something seriously wrong with the way our country finances business. On top of that, Wall Street defends the day traders by saying they add necessary liquidity to the market. Somewhere we seem to have lost the ideals of what the market is supposed to be.

Missouri has a program called MOST. It's a tax-deductible investment program that parents can use to save for their children's higher education expenses. You can contribute up to $8K per year into each child's fund. Six years ago my father put $24K into this program ($8K/child). The year after that, he did it again. Five years later, those funds are STILL not worth the money that was invested. At one point they were each $3K down but now they are almost back to the original $48K investment.

I think the stock market and the people it attracts are worse than Vegas.

And don't get me started on the 401K program. I'll only say one thing...folks typically criticize liberals as those who want to transfer wealth from rich to poor through entitlement programs. In my opinion, the 401K program is an incredible scam that transfers a boat load of money in the opposite direction. I think it's intentions are good. Provide common folks a tax deductible way to easily invest in business. Provide business with millions of stock buyers eager to help them expand. But given who runs Wall Street, I cannot help but think this was engineered.
patcat88
join:2002-04-05
Jamaica, NY

patcat88

Member

Re: Stock Market Doesn't Seem To Work

said by rradina:

And don't get me started on the 401K program. I'll only say one thing...folks typically criticize liberals as those who want to transfer wealth from rich to poor through entitlement programs. In my opinion, the 401K program is an incredible scam that transfers a boat load of money in the opposite direction. I think it's intentions are good. Provide common folks a tax deductible way to easily invest in business. Provide business with millions of stock buyers eager to help them expand. But given who runs Wall Street, I cannot help but think this was engineered.

Your not the only one. When wall street ran out of pension funds as a source of investment capital to rip off, they got rid of them and created the 401K. Its sheep for slaughter. Your better off investing in Gold or Oil.
ackman
join:2000-10-04
Atlanta, GA

ackman

Member

crazy

The only threat to these companies is if they have to bow to Wall Street and not invest in their networks and future competitiveness. The Wall Street mentality of focusing on short term returns is devastating to a company's organic growth. It only encourages growth by acquisition or merger.
pabster
join:2001-12-09
Waterloo, IA

pabster

Member

But There's A New Cash Cow...

...It's called mobile data. The carriers have been preparing for the eventual relegation of both voice minutes and SMS to commodity status (read: low margins) and now they are beginning to cash in on the next cash cow. It's no coincidence that just as a new era of smartphones and tablets with rich media capabilities come out using lots and lots of data they decide to start caps and metering en masse. This has been on the drawing board for years.

WiseOldBear
Laissez les bons temps rouler!
Premium Member
join:2001-11-25
Litchfield Park, AZ

WiseOldBear

Premium Member

Market Analysts Are Scam Artists

Why people pay attention to these arrogant, clueless putzes is beyond comprehension. None of them have ever had a real job, don't live in everyday reality and lie shamelessly in pedaling their crap!

Bill Dollar
join:2009-02-20
New York, NY

Bill Dollar

Member

Where's the Moffett Headshot

Karl, where's the slick douchey Moffett headshot you usually use for stories centered around him? Did he send you a cease and desist?
tmc8080
join:2004-04-24
Brooklyn, NY

tmc8080

Member

no surprise

jack up your prices and customers will flee!
sure, some of you will stay onboard until the price hits some psychological level (equal to the $5 a gallon of regular gasoline equivalent) but this will be a much harder hit for the telecom industry because it's not easy to bounce back from a major cusotmer decline-- just ask Sprint and Mci Worldcom (doubt many people from MCI now work at Verizon except in long-term DOD contracted work from 10 years ago).