AT&T cut its prices on large shared data plans for families and small businesses that use up to 10 lines, a move seen as a reaction to T-Mobile US that could also apply pressure on Verizon Wireless to do the same thing.
The cut, which took effect on Sunday at AT&T, won't directly affect rates for large businesses that negotiate directly with the carrier, but certainly could affect small businesses that rely on a bring-your-own-device strategy for workers.
The data price cut comes during a time of big changes for U.S. wireless carriers who get little profit from voice and text services and must compete with aggressive new plans, especially those from the No. 4 carrier, T-Mobile. While AT&T's latest move is clearly aimed at families and small businesses to mainly compete against T-Mobile, "It could conceivably mean more discounting for larger business customers too," said Bill Menezes, an analyst at Gartner, via email.
AT&T's announcement drops the full monthly 10GB shared data contract plan from $40 per phone to $15 per phone, which AT&T says will mean a family or work group of four would pay $100 less than Verizon, $80 less than Sprint and $20 less than T-Mobile for similar service each month. The new pricing at AT&T only applies to customers who pay for a phone in full up front, or bring in their own phone or use AT&T's Next handset upgrade plan.
Most analysts, including Menezes, regard AT&T's price cut as a reaction to T-Mobile, including the announcement by T-Mobile last month that it will pay up to $650 for early termination fees faced by customers switching from AT&T, Sprint or Verizon.
Menezes said Verizon might not react quickly to imitate AT&T's move, even though other analysts believe Verizon will need to react. Verizon, the largest carrier, "has displayed a lot more patience than AT&T in trading punches with T-Mobile," he said.
AT&T is probably seeing an impact on loss of customers by T-Mobile's moves, "while Verizon believes it can largely wait this out." He noted that Verizon's strong fourth quarter performance "showed no reason to panic."
Asked to comment on the AT&T price cut, a Verizon spokeswoman said her company wouldn't comment on pricing strategies or competitors' plans, but she did say that price is just one factor. "Verizon customers come to us and stay with us because of the many great options we have to fit the way they use all of their wireless devices -- including smartphones, tablets and more -- all on a 4G LTE network that is the largest and most reliable in the country," she said in an email.
A survey conducted by Computerworld of 820 wireless users last year found that a carrier's network coverage is the most important factor in why people choose a mobile provider, followed by price.
Menezes said the survey mirrors what he hears from large business clients. "Price is important, but nothing sends them fleeing from a carrier faster than poor or inconsistent connectivity, especially when it's voice [problems]," he said.
Corporate customers that spend more than $200,000 a year with either AT&T or Verizon typically pay substantially less than consumers for mobile data. If a single consumer pays $20 per gigabyte a month with a shared plan like the one AT&T just announced, a single worker at a large corporation might typically pay $8 or less per gigabyte, Menezes said. Still, the downward pricing pressure affecting consumers could matter to corporate pricing trends, analysts said.
Price cuts don't typically help investors, but could have their biggest impact on customers, mainly in keeping them with the same carrier. Price cuts "would seem to have a bigger impact on customer retention than on increased market share for the bigger carriers," Menezes concluded.
Jack Gold, an analyst at J. Gold Associates, offered a different view. "Customer loyalty only gets you so far, and most carriers don't have a very loyal following," he said. "AT&T's move is both a reaction to T-Mo's aggressive pricing while also trying to further poke a finger in Verizon's eye. Verizon will eventually have to react to all of these pricing moves just to remain competitive."
Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen or subscribe to Matt's RSS feed. His email address is firstname.lastname@example.org.