Changing Tides for U.S. Wireless Carriers

Changing Tides for U.S. Wireless Carriers

Could the Industry be Shifting In Favor of Wireless Users?

August 2, 2013

After years of wireless domination in the US, top carriers might finally have to start watching their backs.

At a glance, it may seem like nothing is out of the ordinary. In 2012, average churn (percentage of contract customers to leave carriers each month) was an impressively low 0.91% for No. 1-ranked Verizon and 1.08% for No. 2-ranked AT&T.*

However, experts speculate that this high retention rate could be a result of customers trying to avoid penalties for leaving their contracts early – and these carriers certainly don’t make it easy to leave a contract on time.

Setting the Stage for Change

1) Recent reports indicate that a growing number of wireless subscribers in the US are unhappy about being locked into contracts with top carriers.

Many customers find themselves eligible and in need of a new phone months before their contract is up, and because most customers can’t afford to buy out the remainder of their contracts, they opt to sign a new two-year deal and get a new phone – thus starting the cycle all over again.

Rhonda Green, an AT&T customer featured in the Wall Street Journal article Good Luck Leaving Your Wireless Phone Plan,* described this process in simple terms: “It kind of feels like a trap.”

2) Smaller carriers are improving their networks, devices and customer service – all of the reasons why users choose bigger carriers in the first place.

Historically, it makes sense that the larger carriers can better afford the high costs of building and maintaining wireless networks, and thus their upgrade to LTE has also been faster. While No. 3-ranked Sprint and No. 4-ranked T-Mobile have just left the starting line, AT&T and Verizon are basically finished deploying their wireless broadband technology.

But in light of recent mergers and huge changes in the industry, Sprint and T-Mobile may have just gotten some major boosts (below).

To be more specific, T-Mobile hopes to add subscribers in the near future due to its lower prices and its new plan that allows customers to more easily upgrade their phones (for more on this topic, see our blog post, “The Truth About Carrier Upgrade Plans“). Sprint will reportedly focus on improving its network and its unlimited data plans – an important detail, considering the fact that AT&T and Verizon have stopped letting subscribers sign up for unlimited plans. Rather, they are promoting plans that charge based on the amount of data they consume.*

3) Sprint just closed a $21.6 billion deal with SoftBank and acquired Clearwire.

This deal, which put 78 percent of Sprint in the hands of Japanese mobile carrier SoftBank, has provided Sprint with some much-needed capital and a promising fresh start in the process. Meanwhile, Sprint also took the opportunity to purchase Clearwire Corp., gaining control of Clearwire’s impressive spectrum – which will boost Sprint’s efforts to build an LTE network. By the end of 2013, Sprint hopes to cover 200 million people.*

The company is making waves by defying industry standards: Customers can finance their own devices or use devices they already own, eliminating the need to tie them to two-year service contracts.

As far as LTE goes, T-Mobile has been catching up. Last month it exceeded its goal of reaching 100 million people across the country with its LTE network – turns out, it achieved 157 million. Looking toward the end of the year, T-Mobile plans to expand to the same promising size as Sprint, 200 million people.

Possible Implications

A little competition is never a bad thing, especially when it breaks up a long-standing industry monopoly of two huge carriers in the wireless industry.

A more evenly-distributed base of customers would ultimately increase the need for all carriers to have a competitive edge, which could mean better pricing, better devices, better contract terms – or maybe even eliminating contracts altogether.

Either way, think unlimited data, innovation and affordability, if not right away, then at least somewhere down the line. For the 326 million wireless subscribers in the US, that’s a wireless industry worth hoping for.

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