Minutes, Messages and Megabytes - Making Sense of Wireless Plans
On a recent visit to the concessions counter at the local Cineplex, my husband and I debated about the size of the popcorn tub to buy. He often argues that the best value is in buying the biggest bucket, while I maintain that it’s not a value because we consistently leave half of the bucket uneaten, since the portion size could feed a small village for a month. Inevitably when we have this debate, other couples join in and take sides, but in the end it is hard to argue that the small bag is a “good buy.”
Wireless carriers appear to have learned a lot about marketing to consumers from movie theater concessionaires. And the recent round of announcements about new unlimited wireless plan pricing from AT&T and Verizon continues the tradition. Intuitively, consumers feel good when the per-unit price of an item seems smallest. Unlimited voice plans give you the smallest per unit charge imaginable, since your phone bill is capped but your usage is not. Wasted minutes – known as “breakage” - are like uneaten popcorn in the bucket under your seat. It’s still the better deal per unit, even if you don’t take the benefit from the extra units. But some consumers wonder, is leaving a monthly pile of unused minutes and messages really a better deal?
There really is no risk that unlimited plans will drive voice consumption higher, because the truth is that voice usage is flattening and voice revenue has been declining. While carriers are hoping to spur the utilization of their voice networks and extract more revenue from their existing network assets, a minute of voice is no longer worth what it used to be to the average consumer.
Text messaging has followed the same bundled pricing strategy, although unlike voice, messaging has grown substantially in the past few years. To protect their margins, US carriers control the messaging costs by leveraging existing voice networks to control message size and offer no specific delivery time frame for messages.
While carriers appear to be giving away unbounded access to their mature voice networks with unlimited minute plans, they are much more miserly about giving away data. The accelerated adoption of web-enabled phones, app stores, and downloadable media has shown carriers where the demand is heading. Within 3 years, analysts believe the number of Internet-compatible mobile phones will be 1.82 billion, exceeding the number of PCs, and drive the majority of website accesses. Within 5 years, these same analysts predict mobile devices will become the main mode of accessing the web.Continued on the next page