U.S. Mobile Price War Just Heated Up

Though a few seem to believe there really is not a price war going on in the U.S. mobile market, Verizon Wireless just lowered prices to match AT&T Wireless shared plans, in particular the “headline” offer of 4 phones, with a shared 10 GB of mobile data, for $160 a month.

Some have predicted the biggest price war in U.S. mobile history. Others have argued there is in fact no price war going on. But one might argue that a price war is indeed under way, despite evidence that U.S. mobile service provider revenues and profit margins have not been affected.

One might well argue that has been true, up to this point. But one might expect to start seeing more evidence in the coming quarters, as Verizon Wireless, which some had perhaps hoped would not participate, now seems to be responding to AT&T’s price attack in the key shared user plans.

Average monthly revenue per postpaid customer across the U.S mobile industry rose 2.2 percent to $61.15 in the fourth quarter of 2013, 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. That is one reason some think there actually is no price war going on. But with Verizon Wireless now moving to match AT&T Mobility’s lower prices on shared plans, the possibility of declines in average revenue per account now is growing.

To be sure, Verizon prefers to count only “revenue per account,” not revenue per user. In the end, the impact of a pricing war should appear, no matter which approach is used.

But there are lots of moving parts. More users are opting for smartphones, which almost always carriers a significant revenue boost in the form of new mobile data fees. U.S mobile user adoption of smartphones is about 65 percent, so there is still some room to run in terms of adding mobile data revenues.

And that will disguise some of the price cutting. But it is fairly clear that Verizon Wireless would not have matched the AT&T Mobility pricing on shared plans were AT&T not getting traction with the offer.

Yes, there is a price war going on, and it appears to be escalating.  
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