Wednesday, May 14, 2008

$99.99 Plans Not Cannibalizing Revenue

Based on the most recent first quarter results from Verizon and AT&T, one would have to conclude that the $99.99 monthly unlimited calling plans introduced in February have not cannibalized revenue.

Verizon reports that 13 percent of its new customers opted for the plan while AT&T had four percent of customers choosing the plan.

Since the number of total users paying $100 or more has been in low single digits, at least as reported by Verizon, it seems clear enough that most customers are trading up the $99.99 plans rather than downgrading from more-expensive plans.

Analysts feared a new price war, but carrier executives seemed to have done their homework on this, and predicted the reaction. Heck, they've probably exceeded their expectations. The bottom line was protecting their base of heavy users.

It now appears the $99.99 plans are adding to the base of higher-average-revenue-per-user customers.

One has to careful making cross-country comparisons, but it appears that Japan's NTT user base is talking less than they used to in 2000, though mobile talking appears still to be growing.

One possible outcome of the $99.99 plans is that more people are going to be tempted to "cut the cord" and abandon their landlines, as one of the obvious problems with wireless substitution is that the added call volume can require a shift to a calling plan containing more minutes.

The $99.99 plans take care of that problem.

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