A Paradigm Shift for Mobile Phone Price Bundles

A Paradigm Shift for Mobile Phone Price Bundles

This article is also published at Fierce Wireless

Roger Entner, Senior Vice President, Research and Insights, Telecom Practice

Traditionally, Americans have bought their mobile telecom services first by picking their voice option, then by choosing between prepaid and postpaid paid plans and determining the number of voice minutes they think they’ll need. Finally, they select from various service add-ons such as messaging options, mobile internet access, device insurance and even roadside assistance. But, voice calling has always been the anchor service.

All that may change as texting rises in popularity and voice usage remains flat or declines. According to Nielsen’s Customer Value Metrics research, which analyzes the wireless services bills of 60,000 mobile subscribers nationwide, 18 to 34-year olds have increased their text messaging from 138 messages/per month to 845 messages/per month between Q1 2006 and Q4 2009. During that same time, their voice minutes decreased from 1,094 to 943. This massive increase in mobile messaging gives carriers the opportunity to create products and pricing plans with text messaging (not voice) as the anchor product.

Last week’s launch of the Virgin Mobile Unlimited Messaging plans is just the first wave of many similar offers to come. These new offers recognize the paradigm shift in how consumers use their mobile devices. When there is a significant customer segment for whom texting is front and center and voice a mere afterthought, carriers have the choice of embracing that segment or missing out.

This is neither the first nor the last product anchor and product packaging innovation. As we penetrate previously uneconomic customer segments with better product and service packages, the revenue from these marginal segments will also drop.

At the same time, carriers can unlock new revenue segments. AT&T’s no-contract iPad data plans and the integrated eBook reader downloads where the transport is bundled into the price are a harbinger of the multi-connection world we will be living in. Both are possible due to lack of subsidies and low-cost billing methods.

By giving these customers the right services and products to fit their needs, carriers could be moving us closer to a multi-carrier relationship model where the carrier becomes less and less relevant. Hypothetically, a customer could purchase voice communications from one carrier, buy a text messaging-centric plan for their teenager from another carrier, and use different carriers for their mobile tablet and their wireless dog collars. That is the likely scenario unless there are more compelling reasons to bundle. While the proverbial “connected” pill bottle is a potential revenue source for one operator, it won’t become a source of profit without the right customer acquisition and service model.

The only way operators can take advantage of these paradigm shifts in the long run, is to switch from selling products to offering total communications solutions, especially for families. As we move from subscriptions to connections as a measure of size for carriers, it becomes uneconomical and wasteful to chase every connection as a subscription, especially when the value of the marginal connection drops in value. Instead, carriers should sign up families (or other economic or legal units) for comprehensive data services across all connections. In a 4G flat-IP world, where voice is just another application, households and businesses want a data “bucket” they can use to view any content they want (internet, music, video, or games) on any device they own.