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Wireless bills go up -- and stay up

Phone costs are ticking higher, even as competition increases among carriers.

By Money Staff Mar 10, 2014 1:14PM

This post comes from Thomas Gryta  at partner site The Wall Street Journal.


The Wall Street Journal on MSN MoneyWireless bills are going up, and they are staying up. WSJ's Tom Gryta explains why, despite competition for smartphones, bills aren't going down yet.


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.


Overall, the average monthly revenue per user across all U.S. wireless customers has recently reversed a long-running decline and rose 0.9 percent in the fourth quarter from a year earlier, according to research from MoffettNathanson.


In the past year, the country's largest carriers have bought up most of the smaller ones that offered cheaper prepaid service. T-Mobile acquired smaller rival MetroPCS Communications Inc., and AT&T has agreed to buy Leap Wireless International Inc.


"When it comes to the monthly prices that people pay, those continue to go up," said Matt Wood, policy director at public advocacy group Free Press. "It has gotten a little more competitive lately, but it isn't effectively competitive yet where the big two have to lower prices."

Frustrated woman with mobile device © Jacqueline Veissid, Photodisc, Getty Images

Market leaders AT&T and Verizon themselves played down the notion that competition on the basis of price has heated up. Representatives for both said Sunday that they also compete on network quality, for instance.


"I think it is interesting given my years in the industry, how you hear things like price war and all that being kicked around in the media today and this is really nothing different than we have seen over the last couple of decades," Verizon Chief Executive Lowell McAdam said on a conference call last month.


Both carriers have an incentive to reassure shareholders worried about their margins. But T-Mobile seems to be on the same page. "I think Lowell put it really well," Mr. Carter, the CFO, said last week.


While the overall effect on prices by the moves and counter moves is muddled, one result is clear: Subscribers are increasingly being moved off plans that offer less-costly, subsidized phones in exchange for signing two-year contracts.


Shifting away from contracts makes it easier for subscribers to switch carriers. But it also gets carriers out from under the burden of providing the subsidies, an expense they have been eager to shed.


Carriers are also successfully moving their subscribers over to smartphones with data plans.

AT&T and Verizon Wireless did away with unlimited data plans for new customers years ago.


In their place, they adopted tiered plans that have positioned them to charge subscribers more when they watch more videos or play more games over the wireless Internet. Unlimited plans were becoming uneconomical, the carriers said, given the cost of building the networks needed to support the traffic.


T-Mobile said Friday that data demand has been soaring under its existing plans. Overall, the company said its subscribers use nearly 50% more data now than they did a year ago. Monthly usage on unlimited plans has nearly doubled and exceeds five gigabytes, it said.


Mike Sievert, T-Mobile's chief marketing officer said Friday that the move to raise prices for unlimited-plan customers partly reflects the cost of providing such plans. He said unlimited-plan users aren't the majority of the carrier's customers.


T-Mobile ended 2013 with a big increase in subscribers and projected more gains this year, but in the process hurt its margins and widened its loss in the fourth quarter.


A wildcard is Sprint Corp. People in the industry have expected aggressive moves from the company after its acquisition last year by SoftBank Corp. , which used fierce competition on price and unorthodox marketing to win customers in its home market of Japan.


Sprint has been hobbled by a tricky network upgrade. Company executives say they can't aggressively go after customers until the network can handle the extra load. That work is expected to be wrapped up in the middle of this year.


More from The Wall Street Journal

56Comments
Mar 10, 2014 2:57PM
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Whatever you do don't believe ANYTHING Sprint tells you-they don't give a damn about their customers or whether they have service or not! Their standard excuse-"Oh we're working on our tower so when we're done upgrading you'll have better service than before!" Unfortunately they have been "working" on some of their towers since 2006!  They lie and are getting away with it, people are paying for service they don't get and I wish some state attorney generals would address this-Sprint is committing fraud and no one seems to care except the people getting screwed-
Mar 10, 2014 3:28PM
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ahahaha everyone addicted to cell phones u will cry bout prices going up but u will still keep your phone so shut up !!!
Mar 10, 2014 2:10PM
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Get rid of the odumber phones that will take $3.00 off the bill.....

 

Again here is the middle class supporting the freeloaders....... Like Dave..

 

 

Mar 10, 2014 3:00PM
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Walmart will soon displace the phone companies and health care companies as a viable alternative......................believe it or not.

Mar 10, 2014 4:29PM
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take out the blood sucking monopoly, known publicly as Verizon, and prices will change.
Mar 10, 2014 4:30PM
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Since carriers are shedding the cost of subsidies, prices for wireless plans should be going down to compensate.
Mar 10, 2014 5:56PM
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i got boost mobile and for 40 bucks a month i have unlimited everything including the 3 and 4 g network, i did buy my phone a motorola moto x for 100 bucks at walmart and needless to say im happy
Mar 10, 2014 2:14PM
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I really don't understand why people use Verizon or at&t anymore.  I have walmart family mobile, which is actually t-mobile.  50 dollars a month, unlimited everything.  I paid about 150.00 for my phone two years ago.  It does every single thing I would ever want to to do.  I just don't understand.
Mar 11, 2014 12:04PM
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If people would stop watching Youtube and movies on their cell phones it'd go down. $30 amonth straight talk with 1000 minutes and 1000 texts and I don't even care about data since I use my phone as a phone and do any surfing at home on the  computer.
Mar 10, 2014 5:45PM
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Shouldn't we be reading an article that says "wages go up and stay up"? Thanks monkey
Mar 11, 2014 11:39AM
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It is time to just cut off the cell phones. period, turn the damb things off and lets go back to paper

that will screw the nsa up real good.

Mar 11, 2014 11:09AM
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Screw smart phones, just get good internet and you wont need a phone.  You can Video Conference, and use voice with free programs out there and not be limited to what you use.  Plus you can limit who calls you.  I have not had a landline or a cell phone in over 3 years and I call whoever I want when I want.
Mar 11, 2014 12:39PM
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These cellphone company are getting ridiculous the prices of just basic service is so expensive. I just need my phone for basic, just talk minutes, no texting no nothing. Our bills should not support Obamas free phones program.


I am thinking of going back to just a home phone, people will just have to wait for me to come home and get their messages. I do like the accessibility of having a cellphone, but not the prices. I would love to get one of the cheap phones, but in the Mountains of NC Verizon is the only service we can trust, not even AT & T works good there it keep dropping the calls or won't even dial through. So we are stuck w/ Verizon's high prices.


Some people are so obsessed with their phones, its ridiculous, they text when driving, or they are talking that they don't pay attention to their driving, causing accidents & causing deaths, over a damn phone.


Sometimes I feeling like saying to friends, leave your cellphone outside my door before entering. This goes to the young & the old. I love having company coming over, but if we are hanging out, its very annoying they are holding a conversation with their cellphone at the same time.

Mar 10, 2014 5:37PM
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T-Mobile offers a $30/month plan that includes 100 minutes of talk + unlimited text + unlimited data (4G for the first 5GB). It's not advertised, and only available to online activation. I bought the Nexus 4 from Google for $300 last year, and activated the plan by buying a T-Mobile SIM card at WalMart for $10. So now I have a better unlimited data plan than you get with the traditional T-Mobile plans, for only $30 a month. 

The downside is the low minutes per month, but I use Skype and other internet calling apps to communicate and not use minutes, so it does not effect me. 

Paying $80/month for an individual is insane.  

The plan is listed under the prepaid plans page, you can't find it on the main website. Search google for "TMobile Prepaid" and then click plans it will be on that page. 
Mar 10, 2014 3:50PM
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My family members are not data hogs. Our cost has gone down and I do not expect it to go up.
Mar 11, 2014 1:09PM
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Not sure why everything costs so much here. When we're in Europe, we pay €5/wk. ($6.50) for unlimited data, and we buy minutes (incoming calls always free in Europe; the caller pays with HIS minutes, even if calling from home phone - just added to his bill) which includes free texts (called SMS there, and preferred over calls for years before used much here). We have to buy minutes at least every six months to keep our number active, so we buy €15 or so ($20). I guess its because there are no contracts there, everyone has to buy their phone, and there are LOTS of companies you can buy minutes from in every tobacco shop and news stand.
Mar 10, 2014 9:34PM
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I changed from prepaid Boost Mobile $45.00, which was pretty good, to T-Mobiles $50.00 plan.  The state I live in doesn't support Boost Mobile in the smaller towns, and the T-Mobile $50.00 plan is really a good plan, and supported very well in the smaller towns.  I've never had any problems with either of these two carriers. I'm really very satisfied with T-Mobile. 
Mar 11, 2014 7:56AM
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Verizon just lowered the monthly rate, same as AT&T.
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So what is this article trying to prove? Cell phone companies are going to try to do everything and anything to attain higher profits. We're the ones who have to understand that. They don't care about you or your situation. In essence, we are just a statistic to them and another way to fill their pockets. So again, what is this article trying to prove?
Mar 10, 2014 4:54PM
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As consumers, as long as you want it, gotta have it and can't do without it...you're gonna pay for it.

And Wal-Mart will rule the world.

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