Lower retail prices are an expected outcome of price wars. So it is not surprising that retail prices for mobile service in the U.S. market have become more affordable in the wake of price attacks by T-Mobile US and now Sprint that seem to be crimping growth for AT&T and Verizon, when not causing actual market share loss.
Recessions also cause sales to slump, most executives in most industries likely believe. Most also likely believe that recessions or difficult economic conditions cause consumers to seek lower-cost solutions.
One example: look at what happened to U.S. cable TV business customer segment growth during the Great Recession that began in 2008. Growth was slashed a much as four times the prior levels.
Recent adjustments of mobile data prices by Verizon and AT&T to raise prices for bigger usage allotments (bigger buckets for slightly-higher prices, producing lower revenue per gigabyte) can be viewed in several ways.
Increasing value is one way of fending off continued price attacks by T-Mobile US and Sprint. In the first quarter of 2016, for example, T-Mobile grew its subscriber base 31 percent. Sprint grew its base three percent. Verizon grew just one percent and AT&T lost accounts.
The attempts to boost perceived value might also be a response to consumer perceptions that tougher economic conditions require more-affordable solutions.
At the same time, consumers might perceive that lower-cost options do not involve unappetizing trade-offs. In other words, high levels of competition have boosted the perceived value of all options, including the “budget” options. And standard retail offers that once might have been deemed “too pricey” no longer have that downside.
The other observation is that the plan revisions by AT&T and Verizon show the continuing trend of lower prices for data consumption. Prices do not fall exactly at rates Moore’s Law would suggest. But in many cases they fall close enough.
As crazy as it seems, U.S. Internet service provider Comcast, now the biggest supplier in the market, has doubled the capacity of its network every 18 months.
In other words, Comcast has increased capacity precisely at the rate one would expect if access bandwidth operated according to Moore’s Law.