US Mobile Bills Rise, Even as Price War Gains Steam

By Gary Kim March 10, 2014

U.S. mobile phone customers are spending more money on mobile data, with average mobile data bills up about 2 percent in 2013, according to New Street Research. The average monthly revenue per postpaid customer rose to $61.15 in the fourth quarter of 2013, up 2.2 percent year-over-year.

In part, the growth is due to growing adoption of smartphones by former feature phone customers and greater data consumption by smartphone owners, as well as retail price plans that encourage connection of incrementally more devices.

With more customers making the move to a smartphone from a feature phone, the average wireless bill for all wireless customers in the United States rose 0.9 percent in the fourth quarter of 2013 compared to 2012, according to Wall Street Journal.

Paradoxically, that increased demand for mobile data, which is leading to higher data spending, is occurring within a context of retail pricing pressure that is subtle in many respects.

For starters, advertised service rates can be lower, in a growing number of cases, because device installment payments have replaced device amortization that is part of an overall service contract. Overall monthly payments might not change all that much, especially when consumers buy phones on separate installment contracts.

Multi-user “family” plans also have changed, with variable charges now based on mobile data consumption, not voice or texting, which in many cases becomes a flat fee part of service. In such cases, even when formal prices do not change much, value does, as users essentially get unlimited domestic calling and texting, where it once was metered.

On the other hand, competition now is leading to unlimited international texting as well. “More value, same price” is often the form competition takes, and “price cuts” are expressed.

On the other hand, leading firms such as AT&T Mobility recently have dropped prices on Mobile Share plans as well as single-user or two-device plans.

In February 2014, AT&T announced its “best-ever mobile pricing plans” for families and small businesses, part of an on-going response to price attacks by T-Mobile US. Verizon, for the most part, is taking smaller steps to protect its prepaid customer base, suggesting that Verizon sees the immediate danger to itself coming in the “value” segment of the mobile business.

T-Mobile US countered AT&T’s move by increasing data allowances for buyers of its “Simple Choice” plans.

On March 9, 2014, AT&T launched a new pricing plan (the offer expires at the end of March 2014) that extends savings of the “Mobile Share Value” plans to customers with one and two lines.

The new lower priced 2GB Mobile Share Value plan starts at $65 a month, which is $15 off the current 2GB plan for one smartphone with no annual service contract, AT&T says.

The importance of the latest move by AT&T is that it suggests the terrain of contested market segments now is wider than at first. T-Mobile initially attacked the single device market. AT&T responded to protect its important multi-user accounts.

Now AT&T has moved to extend discounts across nearly its entire postpaid customer base.

Some might argue there is “no pricing war” going on in the U.S. mobile market. Wait until mid-2014, when Sprint has finished its network modernization program and can market nationally. 




Edited by Alisen Downey

Contributing Editor

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