How Much Competitive Advantage Did T-Mobile USA Gain from "Jump?"

“Sustainable competitive advantage” is a difficult challenge in competitive markets, and especially when the advantages are new retail packaging concepts. T-Mobile USA has gotten confirmation of that difficulty.

T-Mobile USA had unveiled its “Jump” program just a few days ago. Jump allows customers to trade in their existing phone as much as twice a year, with payment of a $10 a month fee. That innovation was intended to differentiate T-Mobile USA from the policies of the other three national carriers, which have restricted “new phone upgrades” to about once every 20 months or so.

That move is part of T-Mobile USA’s “Uncarrier” campaign, designed to position T-Mobile USA as different than AT&T or Verizon Wireless.

But AT&T already has countered with its own similar program, and Verizon will unveil the details of its new plan shortly. Sprint’s response is not yet known.

Firms can obtain a competitive advantage by “implementing value-creating strategies, not simultaneously being implemented by any current competitor,” strategists might say. But it often is too easy to claim such advantage.

Competitive advantage really only is possible when strategies provide value that is rare, valuable, and non-substitutable.

“Sustainable competitive advantage” is obtained when those advantages that are not easily copied by other contestants and can be maintained over a long period of time.

If a firm’s competitors can counter quickly, there is no sustainable advantage. In fact, one might argue whether there is much advantage.

In the mobile service provider business, one might ask whether there is any such thing as sustainable competitive advantage. From time to time, a firm can gain some ground. AT&T having a monopoly on the Apple iPhone provides a recent example.

Verizon Wireless building out its Long Term Evolution 4G network might provide another example of a tactical advantage.

But it is hard to point to sustainable sources of advantage in the mobile business, in the sense of “rare” and “non-substitutable.”

AT&T “Next,” to be available July 26, allows AT&T customers to buy their devices on installment plans that pay off the device cost in 20 months, as does the T-Mobile USA plan.

AT&T customers also can upgrade after a year by turning in their old phone and beginning payments on a new phone.

Verizon is expected to detail its "VZ Edge" upgrade option in the near future as well.

Using AT&T Next, a customer buying an Apple iPhone 5 with a retail price of $650 would make monthly payments of $32.50 a month. Under a traditional AT&T two-year contract plan, the same device would cost about $200 upfront.

The shift of all three carriers to new device payment plans will arguably be more transparent and will allow customers the freedom to upgrade devices on a more timely basis.

But the moves by Verizon Wireless and AT&T to match the new T-Mobile USA device programs also shows how hard it will be for T-Mobile USA to mount and sustain any marketing initiatives that truly distinguish T-Mobile USA from either AT&T and Verizon Wireless, when those carriers think the new initiatives, offers or retail packaging actually will resonate with customers.