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Monday, March 10, 2014

Wireless Bills Go Up, and Stay Up

As reported by the Wall Street JournalCompetition in the U.S. wireless market has increased over the past year, but so have Americans' overall phone bills.

While carriers have trimmed the price of their plans here and there in recent months, billings per user continue to grow amid a shift to smartphones and a surge in wireless Internet use.
The results call into question the notion of a price war in the U.S. market. Rather than aggressively compete outright on price, carriers are tailoring their moves to accomplish other goals as well, like weaning customers off expensive smartphone subsidies and encouraging them to use more data.
T-Mobile US Inc. 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.
To be sure, subscribers can find deals that weren't available before. AT&T Inc. on Saturday said it will cut the price of plans offering unlimited voice and text with two gigabytes of wireless Internet use by $15. A subscriber who brings or buys his own phone can pay as little as $65 a month, about 19% less than previously.
Last month, Verizon Communications Inc. raised the wireless-data allotments on similar plans, effectively lowering their cost. T-Mobile made that same adjustment to its tiered data plans on Friday, even as it raised the price of its unlimited plan by $10 to $80 a month for a single user.
Still, billings for the industry's lucrative postpaid customers are continuing to rise.
Average monthly revenue per postpaid customer across the industry rose 2.2% to $61.15 in the fourth quarter, according to New Street Research. That is up more than $5 per user from the first quarter of 2010, when the same measure was at $55.80.
New Street's data adjusts for the fact that T-Mobile generally doesn't subsidize phone purchases. In the past, carriers would pay hundreds of dollars of the cost of new phones then recover it over the life of a two-year contract by adding it into subscribers' bills.
With that embedded subsidy gone, monthly service fees are lower. Customers aren't actually turning over less money, however, because they typically now pay off their phones in monthly installments using carrier financing plans. Mr. Carter, the T-Mobile CFO, said in an interview last month that the total amount the carrier is collecting from its customers on average has gone up.
The high cost of smartphones and data plans means Americans are on average spending more every month on their phones.