Unlimited Offers Simply Push Competition Elsewhere

Mobile service providers generally detest competing on the value of their internet access packages, the reason being that offering bigger--and unlimited usage allowances--typically means consumers will use more, creating more demands for capital investment to support the higher usage.

At the same time, revenue per unit sold drops. That tends to hit profit margins, if not revenue.

Also, major competitors simply match any popular new offers, so no particular retail package offers sustainable advantage. For example, in any markets where all the leading providers offer “unlimited usage,” that feature recedes as a source of advantage, since all the suppliers offer the feature.  

Ironically, when all the key suppliers move to any single lead offer--unlimited usage, for example--competition necessarily shifts to other aspects of the offers.

Not only does the adoption of any key feature nullify chances for business advantage, it also shifts combat to other realms.

In the U.S. mobile market, that now possibly means competitive advantage shifts to features such as headline speed. And that, you guessed it, is an area where sustainable advantage will not exist, as all the suppliers eventually will match any offers that threaten to give another competitor sustainable advantage.

The other problem is that there are diminishing returns to a strategy based on “ever-faster” speeds, given the higher capital investment and the certainty that competitors will match--or exceed--those speeds. Higher investment, in other words, does not lead to sustainable advantage.

If all the four leading U.S. mobile operators offer “unlimited usage” as a lead offer, that means consumers will make decisions on other elements of the offer: price, headline speed, device discounts or other aspects of the experience.

In fact, according to a recent survey conducted by Business Insider Intelligence, 84 percent of respondents agreeed that a high-speed mobile network is the most important offering to consider when selecting a mobile provider.

Just 68 percent reported that unlimited data was “extremely important.” In other words, you might argue, the shift to unlimited offers by all four leading operators, whatever that means for capital investment and usage, has simply shifted consumer buying criteria elsewhere.

And that “elsewhere” includes “lower price” and “higher speed.” The former hits profits, but so does the latter, as it requires higher capex.

source: Business Insider