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Despite T-Mobile's Disruption, Wireless Prices Rising
Despite all the drama surrounding T-Mobile's price disruption, overall industry prices continue to rise, notes the Wall Street Journal. While T-Mobile's moves may have had some positive impact on policies like early termination fees and contracts, overall prices aren't trending downward, and companies (including T-Mobile) are being very careful to avoid a price war. While T-Mobile CEO John Legere loves to make noise about disruptive pricing on Twitter, the company's CFO is privately telling investors the very last thing they want is a price war:
quote:
T-Mobile raised the cost of its core unlimited data plan on Friday. The carrier says it has been competing more effectively by doing away with subscriber "pain points" like service contracts and international data fees. But its executives have also been signaling that they don't plan to start a price war. "When you really analyze a lot of the pricing moves that have been made, there has not been a significant repricing," Chief Financial Officer Braxton Carter said at a Morgan Stanley conference last week.
In case you missed it, that's T-Mobile's money man admitting that they're not being really as disruptive on price as their marketing suggests. Verizon, for what it's worth, agrees with T-Mobile, noting they don't really see what all the fuss is about:
quote:
"I think it is interesting given my years in the industry, how you hear things like price war and all that being kicked around in the media today and this is really nothing different than we have seen over the last couple of decades," Verizon Chief Executive Lowell McAdam said on a conference call last month.
Granted Verizon has the luxury of dominating 80% of the retail market and special access market with AT&T, while also holding the lion's share of spectrum. There's not significant price competition because in the eyes of AT&T and Verizon, T-Mobile barely registers at the moment. That could change, or it could become even less pronounced if T-Mobile is allowed to merge with Sprint.
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rradina
join:2000-08-08
Chesterfield, MO

rradina

Member

T-Mobile Cannot Afford Price War

While all carriers need continued investment in their plant, T-Mobile is currently in the least favorable position to invest in both a price war and their plant. They already charge less than the dynamic duo and if the duo matched T-Mobile's prices, T-Mobile would have to drop their prices because they cannot compete on service. (For the same price, why would anyone choose less coverage?)

why60loss
Premium Member
join:2012-09-20

why60loss

Premium Member

Re: T-Mobile Cannot Afford Price War

said by rradina:

While all carriers need continued investment in their plant, T-Mobile is currently in the least favorable position to invest in both a price war and their plant. They already charge less than the dynamic duo and if the duo matched T-Mobile's prices, T-Mobile would have to drop their prices because they cannot compete on service. (For the same price, why would anyone choose less coverage?)

The only thing that really helps them is the unlimited data plan with the 1TB softcap.

And that the cheaper plans don't make you pay for going over the 1,3 or 5GB high speed limit.

Mr Guy
@charter.com

Mr Guy

Anon

Re: T-Mobile Cannot Afford Price War

said by why60loss:

The only thing that really helps them is the unlimited data plan with the 1TB softcap.

And that is unsustainable and T-Mobile will start losing customer again. T-Mobile would have been better served by expanding coverage than starting a price war. My area has thousands of square miles where T-Mobile actually has spectrum to deploy but no towers. So there's potentially hundreds of thousands of possible customers T-Mobile could have had.

Even if I lived in a big city that had T-Mobile I'd be reluctant to get it because many of the areas I travel to do not have T-Mobile service.
BiggA
Premium Member
join:2005-11-23
Central CT

BiggA

Premium Member

Re: T-Mobile Cannot Afford Price War

Exactly. Until their network is better, they are a non-player in the market. And their traditional low-end market is basically being killed by Wal-Mart brining in AT&T and Verizon to do $45/mo unlimited prepaid.

Lovetmobile
@12.184.104.x

Lovetmobile to rradina

Anon

to rradina
Because the "less coverage" doesn't matter. I only travel to major US cities, internationally ( great T-Mobile coverage at no additional cost), and my home market with great coverage ( and I live 25 miles outside a major city).
rradina
join:2000-08-08
Chesterfield, MO

rradina

Member

Re: T-Mobile Cannot Afford Price War

Price and voice/text/data plan being equal equal, you would still choose TMO over ATT or VZ? The point I'm trying to make is TMO's coverage is not on par with ATT or VZ. If the latter match TMO on price and plans, who would choose TMO and suffer with less coverage -- even in the major metro areas?
Skippy25
join:2000-09-13
Hazelwood, MO

Skippy25

Member

Re: T-Mobile Cannot Afford Price War

I would without question. Just like I choose Sprint right now over those 2 and it has nothing to do with price.

As soon as my other 3 phones are off contract we will be switching to TMO on shear principle and because I like what they are trying to do to the others.
BiggA
Premium Member
join:2005-11-23
Central CT

BiggA

Premium Member

Re: T-Mobile Cannot Afford Price War

Principle isn't going to get you service when you want to use data, send a text, or make a call.
BiggA

BiggA to Lovetmobile

Premium Member

to Lovetmobile
You should try traveling around in the US once in a while. If you travel domestically, and actually go see much of anything, you WILL go way beyond the limits of decent T-Mobile service. You even WILL hit areas where there is no coverage from any carrier.
shmerl
join:2013-10-21

shmerl

Member

Why not?

What can T-Mobile lose by staring a price war (or essentially by simply lowering prices)? For example T-Mobile could roll out a truly unlimited plan for $60-70/month (flat fee, all taxes and hidden charges included in it). Would that be sustainable, or not? And if it would, why can't they do it?

toby
Troy Mcclure
join:2001-11-13
Seattle, WA

toby

Member

Re: Why not?

said by shmerl:

Would that be sustainable, or not? And if it would, why can't they do it?

Because while most would use less than 10GB of data.
Some would use hundreds of GB tethering which could cause the lower users to cancel.
shmerl
join:2013-10-21

shmerl

Member

Re: Why not?

How exactly high data usage of some users affect others? I.e. we aren't talking about network congestion (let's assume that's solved and bandwidth is not exhausted), we are talking about some users having tons of traffic within their allocated channel bandwidth. So how does it affect others?
davidhoffman
Premium Member
join:2009-11-19
Warner Robins, GA

davidhoffman

Premium Member

Re: Why not?

You must not know any teenagers or twenty somethings. Every single one of them would leave their mobile cellular devices with simultaneous streaming music, streaming video, Facebook, Twitter, and chat operating 24/7/365 if they had access to unlimited data. Tower saturation in many T-mobile areas would occur within 91 days from the start of unlimited data. As fast as T-mobile could add capacity, the new towers or capacity would be overloaded. There is no way they could get the revenue needed to keep up with that amount of usage. Wireless or cellular is not a medium that is suitable for "unlimited" usage the way a teenager views it. They take it literally to mean unlimited amounts of data transferred, not unlimited amounts of tower checks from the device saying here I am. Those check-ins with the tower take only a small amount of bytes every minute or so. Those check-ins are what the cellular company means when they talk about "unlimited" data usage. Anything more than that is problematic for them.
shmerl
join:2013-10-21

2 edits

shmerl

Member

Re: Why not?

I'm not convinced. Bandwidth saturation happens not because of prolonged usage, but because of simultaneous usage. These are orthogonal. The only downside of prolonged usage could be some limits that T-Mobile can face for the total amount of traffic (for example if they have to pay per traffic amount to the higher level network). But it's a completely different issue and it doesn't seem to concern them at all. You are talking about bandwidth saturation.

If network is too underdeveloped, it doesn't matter what monthly data caps are in place - saturation would happen the moment certain amount people would start using the network at the same time. If that happens - too bad, the only way to solve it is to build up the network to handle more simultaneous traffic. Let's repeat it again - data caps can't prevent bandwidth congestion.
davidhoffman
Premium Member
join:2009-11-19
Warner Robins, GA

davidhoffman

Premium Member

Re: Why not?

Yes, you hit it. The T-mobile network is located where millions of people are going to simultaneously use the network to do whatever it is they do with mobile data. That will create congestion problems. The problem is that T-mobile could not build its way out of such congestion causing situations. Towers take time to build. Picocells and microcells? Sure put them in the mix also. But they take time to install and will need good fiber or metro Ethernet connections also.

Data caps cannot prevent bandwidth congestion. Data caps and serious overage charges can make people think before they decide to use a cellular data transfer system. Add in some time of day and day of the week variable pricing and you might get some users to shift their usage to less saturated times. " Do you really need to download that 1GB HD cat video at 2:00PM on Friday when a 1GB costs $100? You could download it at 2:00AM on Sunday when a 1GB is $1." I know people who use Millenicom cellular for internet access. 20GB per month. That is the cap. Go over a certain amount and you get a warning. Go over again the same amount the next month and you risk getting booted. Go and do it in the third consecutive month and bye bye. You bet those subscribers keep close track of what they do with data transfers and how much they use.

I had to bail out a friend one month with my Millenicom account when his daughter decided to stream music and download music for many hours for several days using his Millenicom account. She did not understand that while her laptop was connected to a WiFi router, that router was being fed by a 20GB/month capped cellular modem. She had used up 10GB in one week of mostly music downloads. It took a couple of hours to explain to her how different ISPs work through different technologies, but she learned to do some of her non essential for school data transfers at friends houses who had cable or DSL connections. She also learned to use her school's network for some of her educational downloads before she came home each day. The entire family has to avoid YouTube and use blocking software to cut down on GB guzzling ads embedded in websites. So it is possible to influence usage with caps and pricing.

Unlimited data will not work with cellular or any other wireless system. It does not matter how many technological advances we have used in the past, you always end up with ridiculous congestion issues. Based on that I do not see where unlimited data can fit into a wireless ecosystem. Caps, overages, and throttling will be needed to allow some semblance of fair access and usage for all subscribers of a wireless system.

Now those FTTH connections of the future are another matter.
sonicmerlin
join:2009-05-24
Cleveland, OH

sonicmerlin

Member

Re: Why not?

You literally have no data to support your rampant speculation.

Mr Guy
@charter.com

Mr Guy to shmerl

Anon

to shmerl
said by shmerl:

How exactly high data usage of some users affect others? I.e. we aren't talking about network congestion (let's assume that's solved and bandwidth is not exhausted), we are talking about some users having tons of traffic within their allocated channel bandwidth. So how does it affect others?

Because mobile bandwidth very limited. At best a tower sector might have a capability of 150 Mbps for use with ALL users combined. How many people tethering and watch HD Netflix at 5 MBs does it take to use all of the 150 Mbps? 30? And in some areas T-Mobile towers can only do 75 Mbps.
shmerl
join:2013-10-21

shmerl

Member

Re: Why not?

Are you saying in some areas total mobile bandwidth is limited to 150 Mbit/s? So if 100 people would be using the network at the same time they'll get 1.5 Mbit/s max? That's way too limiting.
sonicmerlin
join:2009-05-24
Cleveland, OH

sonicmerlin to Mr Guy

Member

to Mr Guy
Dude... A cable node supports hundreds of users on a few hundred megabits/s at best.

Karl Bode
News Guy
join:2000-03-02

Karl Bode to shmerl

News Guy

to shmerl
quote:
What can T-Mobile lose by staring a price war (or essentially by simply lowering prices)?
They lose potential revenues that could be put toward their greatest weakness: network coverage. They're still well behind on that front.
shmerl
join:2013-10-21

shmerl

Member

Re: Why not?

I guess you are right. They are in a weaker position, and need to pour more resources into expanding the coverage in comparison with the competition. But on the other hand, any provider can face such issue. It's a question of what is a sustainable pricing which also allows growth vs. overpricing rip off. I really have no idea where the line is drawn in this case.
sonicmerlin
join:2009-05-24
Cleveland, OH

sonicmerlin to Karl Bode

Member

to Karl Bode
T-mobiles ARPU is 1/3 Verizon's. I imagine their $30/month plan plays a role in that. The price war already exists.
openbox9
Premium Member
join:2004-01-26
71144

openbox9 to shmerl

Premium Member

to shmerl
T-mobile may when a battle or two, but if the sleeping giants (AT&T and Verizon) are awoken, they will win the war. T-mobile and Sprint both know that. Why do you think they want to merge?

Mr Guy
@charter.com

Mr Guy to shmerl

Anon

to shmerl
said by shmerl:

What can T-Mobile lose by staring a price war (or essentially by simply lowering prices)? For example T-Mobile could roll out a truly unlimited plan for $60-70/month (flat fee, all taxes and hidden charges included in it). Would that be sustainable, or not? And if it would, why can't they do it?

A) Well last quarter they gained 1.6 million customers and still lost $20 million. Meanwhile Verizon also gained 1.6 million customers and made $5 billion in profit. And there's your issue

B) they just raised the cost of unlimited data with 5GB tethering to $80
itguy05
join:2005-06-17
Carlisle, PA

itguy05

Member

Re: Why not?

quote:
A) Well last quarter they gained 1.6 million customers and still lost $20 million. Meanwhile Verizon also gained 1.6 million customers and made $5 billion in profit. And there's your issue
Except you're not being completely truthful at all. That $5 billion was for all of Verizon - wireless, wireline, FIOS, etc. They don't break out the wireless profits at all.

And if you look at churn, it is up since Q4 2012. Not a lot but a little and that has to have them thinking.

I know when I called last week to port out a number (to Page Plus) they were very apologetic and just had that tone that they were seeing a lot of people going. Will be interesting what happens in a few months if/when I port the rest....

I personally think people are looking at where they use coverage and if the cheaper guys work then they are going there. I know I am.
shmerl
join:2013-10-21

shmerl to Mr Guy

Member

to Mr Guy
Yeah, I wouldn't compare T-Mobile and Verizon total profits. Verizon is way more diverse.
jtel
join:2005-06-28
Bristol, RI

jtel to shmerl

Member

to shmerl
Deutsche Telekom had to dilute their shares by 9% for TMUS to buy the 700A from Verizon. There are 2 more auctions soon, the upper AWS and 600.

Will DT dilute their shares by maybe 30% so TMUS can continue to be disruptive? In my opinion that's doubtful. It's pointless to own a company if you are forced to sell shares in order for them to upgrade their network. TMUS used the $3 billion from the AT&T breakup fee to finance their current network from where it was. That's been spent.

Either the FCC and DOJ approve a SoftBank buyout or Dish buys T-Mobile from Deutsche Telekom this year.
itguy05
join:2005-06-17
Carlisle, PA

itguy05

Member

Re: Why not?

quote:
Will DT dilute their shares by maybe 30% so TMUS can continue to be disruptive? In my opinion that's doubtful. It's pointless to own a company if you are forced to sell shares in order for them to upgrade their network.
#1. Typical short sighted thinking and what is wrong with this country. Verizon could have owned Internet/TV/Phone had they kept on with their FIOS expansion, and it was a shame the visionary that started it and ket with it left the company. If DT wants to adopt a long term view they will spend the money. Short term, yes it will cost them. But with increased adds and reduced churn and it could work out well long term. If momentum keeps up (we'll see) it could be a good thing.

#2. Thats assuming T-Mobile doesn't issue bonds to finance spectrum. According to Mornignstar they are a BB- rating so their is a fair expense (Current T-Mo bonds pay 6%) but it may be preferred to using equity to finance it.

#3. T-Mobile also has a decent amount of spectrum in many areas and there is still a bit of smaller local/regional carriers to be gobbled up.
tkdslr
join:2004-04-24
Pompano Beach, FL

tkdslr

Member

Give it time...

As people smarten up and shift to lower cost plans..

The pricing chart ends with 2013, AT&T, Verizon only announced their pricing cuts in 2014.

So give it time. It won't happen overnight, wait for it.
openbox9
Premium Member
join:2004-01-26
71144

openbox9

Premium Member

Re: Give it time...

VZ just said they aren't playing that game. If T-mobile is foolish enough to actually start a pricing war, it wouldn't survive long, and management knows that.
MaynardKrebs
We did it. We heaved Steve. Yipee.
Premium Member
join:2009-06-17

MaynardKrebs

Premium Member

What they ought to do is ......

Breakup Verizon & ATT & Sprint - just in the same way the 'old' AT&T of the 1980's was broken up.

Break Verizon and ATT and Sprint each into companies the size of T-Mobile, however many that would be, and divvy up the assets equally (via lottery) into the resulting companies so that they all have POP's and spectrum in all the major market, and so they all have rural areas to serve.

What would that do?

There'd be 5-6 new smaller national competitors to T-Mobile, each about the same size as T-Mobile. It's when you have competitors of roughly similar size and reach that you finally begin to get the makings of a competitive market.

They ought to do the same with the big banks - break 'em up (first spinoff the investment banks under a new Glass-Steagall) so that there are 8-10 banks the size of say the 6th largest bank in the country. Then let them compete.

And in both cases, no mergers/buyouts for 20 years.
openbox9
Premium Member
join:2004-01-26
71144

openbox9

Premium Member

Re: What they ought to do is ......

said by MaynardKrebs:

so that they all have POP's and spectrum in all the major market, and so they all have rural areas to serve.

No single carrier has that now, so I'm curious how you would make this work. What about the small regional carriers that fill the gaps? I'm struggling to see advantage of "shuffling the deck".
said by MaynardKrebs:

There'd be 5-6 new smaller national competitors to T-Mobile, each about the same size as T-Mobile.

All with spotty coverage because none of the carriers would likely roam on each other if they all have the same coverage/footprint.
said by MaynardKrebs:

They ought to do the same with the big banks - break 'em up (first spinoff the investment banks under a new Glass-Steagall) so that there are 8-10 banks the size of say the 6th largest bank in the country. Then let them compete.

No need for that as there are plenty of banks (both investment and consumer). I do agree with firewalling investment from savings though.

w0g
o.O
join:2001-08-30
Springfield, OR

w0g

Member

T-Mobile's data prices..

Rising, because they're trying to squeeze every penny out of us.

Lets take a look at how much data I got for my $20, for example:

56GBs, all from tethering and also video uploads to YouTube this month, and website management.

My tethering a lotment is 2.5GB, and I mask that activity using my rooted phone and encryption, which T-Mobile can't detect. But anyway, I imagine the reason they're doing this is to try to get a few more dollars out of guys like me, who get the unlimited plan and bypass the hotspot limit ..

o.o

••••

IowaCowboy
Lost in the Supermarket
Premium Member
join:2010-10-16
Springfield, MA

IowaCowboy

Premium Member

So aren't cable bills

Just got my Comcast bill today for my internet the few channels they throw in with it and the home automation. Went from $98 to $103.

Everything is going up except for our incomes.

Verizon is worth the money though, people are willing to pay for it. They have not only the largest network footprint but also the better reception of the carriers. People criticize Verizon because of price but the cut rate carriers don't have the network qualities that customers want (coverage area and signal strength). And no, I don't work for Verizon; I pay them money for the privilege of using their network.

••••••
egilbe
join:2011-03-07

egilbe

Member

Prices dropped for me.

First time since I left behind my tracphone that prices dropped. I was paying $130 for two smart phones and a shared 1GB plan and am now paying $90 for a 2GB shared plan. This was all in the last couple months. Still not sure why the 1GB shared data plan is more expensive than the 2GB, but that's AT&T for you.