Surviving the Recession: Finding Wireless Value

Despite common perception, value isn’t always synonymous with low price. Wireless operators have waged price wars in the past, but the end result is typically an even playing field. As was the case with the all-you-can-eat race kick-started by Verizon, every carrier ended up sticking to a $99 price point, but they kept adding more services and features into the unlimited plan – essentially adding value – to win customers over. The recession is carving a particular niche for smaller carriers to ramp up their presence by having this value message attached to their name.

“[AT&T and Verizon] have taken the stance of, ‘We’re the premium carriers, we are more expensive because we have the network, the service, the nice handset selection,’” said Bill Ho, wireless services analyst for Current Analysis. “The value carriers are changing the playing field.”

T-Mobile, traditionally known as the value carrier, just recently revamped its data plans but not with a cheaper price tag. The fourth-largest carrier upped prices to a base rate of $10 but changed its marketing to play up the value of the mobile Web and messaging compared to competitors AT&T and Verizon’s plans that start around $15. Likewise, Sprint’s prepaid budget brand Boost Mobile is being reinvigorated by the carrier with a focus on value. Ho said Boost is designed to compete against two of the strongest value carriers, Leap Wireless and MetroPCS, which specialize in local wireless calling plans.

“People are thinking if you fall out or have bad credit and cannot afford post-paid but still value wireless, then prepaid it is,” Ho said, adding that prepaid options offer flexibility with pay by the minute, day or month, as well as hybrid plans to include post-paid plan benefits. “Within that, what has been disruptive, although not nationwide, is when Cricket or Leap did their dollar-a-day thing.”

In October, Leap introduced a new prepaid plan for Cricket, its wireless service. Consumers can now get unlimited calling for $1, $2 or $3 per day, and they will only pay for the days they use their phones. With plans like this, Leap and MetroPCS are winning over more customers wherever they launch, and their wins typically come from cord-cutters in increasingly dense metropolitan areas. Both regional CDMA providers’ plans include unlimited minutes in a customer’s home market but charge separately for each minute used outside their home market. They target the growing demographic of lower-income customers who rarely travel. Especially for smaller households, Leap and MetroPCS present a convincing case for getting rid of a landline altogether, according to Rory Altman, director of Altman Vilandrie & Company.