More U.S. Spectrum Thoughts with RCRTV

RCR followed up the previous U.S. spectrum webinar with a RCRTV session in which Dan Meyer (Editor in Chief of RCR Wireless News) , Jeff Silva (Medley Advisors) and I go into different topics. Some of these included the H-block spectrum auction/DISH strategy, unlicensed spectrum/3.5GHz, regulatory progress, Cable WiFi, etc.

RCR Wireless Webinar on Spectrum (U.S.)

I took part in an RCR Wireless Webinar entitled : Spectrum Economics - The Emerging New Paradigm of Spectrum Use

Spectrum is the lifeblood of the wireless telecommunications space, and with a finite resource straining to serve an increasingly data-hungry consumer base, the pressure is on to free up new assets, for carriers to get their hands on what’s available and for equipment vendors to find more efficient ways to use what’s available. RCR Wireless News will take a look at the current spectrum market, from the ways the federal government is trying to free up spectrum, to the importance of current spectrum auctions and looking at developments in technology and small cells designed for greater efficiency.

What You Will Learn: 

How the wireless industry values wireless spectrum and ways in which vendors and wireless carriers are trying to squeeze more efficiency out of current supplies. Also a view on how the federal government is looking to free up more spectrum for non-conventional uses.

Who Should Watch: 

Those involved with network planning, including small cells and non-traditional networks. Also, those involved with roadmap planning for wireless carriers, vendors and equipment providers. 

Moderator: Dan Meyer, Editor-in-Chief, RCR Wireless News 
Analyst Angle: William Ho, Principal Analyst, 556 Ventures
Panelist: Jeffrey S. Silva, Sr. Policy Director, Telecommunications, Medley Global Advisors
Panelist: Steve Berry, President and CEO, Competitive Carriers Association

Register at RCR Wireless here to hear it.

Bullet Point Analysis: AT&T's Quick & Expected Mobile Share Value Adjustment

WHAT IS IT?

On Saturday March 8, AT&T announced several minor adjustments to its Mobile Share Value plans that went into effect the next day.   Specifically, 

• The 2GB plan's pricing was reduced from $55 to $40
• The 1GB and 8 GB plans were retired.
• AT&T cloud storage (AT&T Locker) increased from 5GB to 50GB.

ANALYSIS

This minor adjustment was expected as AT&T moved to offset an outstanding vulnerability against Verizon Wireless' More Everything launch on February 13.  To recap, Verizon adjusted some price points, introduced stateside international messaging and increased Verizon Cloud storage to 25GB. With this Saturday announcement, AT&T has now responded specifically to one up/change the playing field against its largest competitor. 

Let's look at the responses:

• Domestic international messaging - In about 12 days, AT&T responded and automatically included this feature into its Mobile Share Value plans.

• Subscriber cloud storage now 50GB, is double that of Verizon's 25GB.  Moving from 50GB from 5GB is substantial, and if the carrier can position itself as an attractive alternative to OTT players [OneDrive (7GB), Google Drive (15GB), iCloud (5GB), Amazon Cloud Drive (5GB), etc.] and get users to actively use the cloud, it can help the subscriber churn profile.  

• Finally, the meat of the pricing move - the $40 2GB level.  Recall Verizon's More Everything launch created a competitive pricing vulnerability with AT&T's two levels - 1 and 2 GB. These levels were $5 more expensive than Verizon and in the premium carrier switching game, this is significant.

• Rather than taking from the tired price parity playbook, AT&T changed the value proposition and doubled the data at the same price point (see below chart).  Now it is at a pricing advantage. To help the cause, the 1GB plan has been retired. This gives direct retail and channel sales reps a no-brainer price savings proposition to close their deals.  Also interestingly, the $90 8GB level has been removed as the absence of the data tier and price point helps the carrier push the 10GB level that it has been running in commercials and advertisements. The price value advantage is further expanded as AT&T's Next per smartphone price (>10GB) is $15 versus Verizon's $20 (>8GB).

• Oddly enough, the price vulnerability at the $130 price point is untouched. Whether the subscriber base hasn't moved to that level of shared consumption or competition may be an explanation. However, small/medium business accounts may be playing in that range.  This level bears watching.

COMPETITIVE IMPACT?

• Verizon will likely respond now that it has a pricing disparity.   On the rest of the portfolio, while Verizon can position itself a giving more data plan choices with 17, AT&T's portfolio has now simplified to 10. Plan rationalization is the logical step.  All these choices may be too many for the entry data customer(s). These entry data customers that are migrating from feature phones or standard 3G customers are good targets for AT&T.  Verizon has over 50 million of these customers and if AT&T (or competition) can bleed off a percentage of this, this would be worrisome for Verizon Wireless' 2014 smartphone growth/upgrade trajectory. The stakes are high. 

• T-Mobile doubled its data allowances a day ahead of AT&T's adjustment. Its entry offering of 1GB is stronger coupled with its price leadership. However, T-Mobile does not have any cloud storage offering. It stands to reason as it hasn't made a huge cloud storage infrastructure bet as AT&T and Verizon has made in the past 2-3 years. These competitors have owners economics in its infrastructure. If it is a big deal, then T-Mobile will partner with a provider (T-Mobile Netherlands works with Google to give 5GB). 

• Sprint now has seen a great deal of competitive action since its January Framily launch. That Framily campaign centers on 1GB usage and over time, will 1GB be obsolete? Clearly, the upsell to these customers is going to the Unlimited, My Way plans. The bigger worry and expected move will be domestic international messaging.  All competitors include this with their plans and Sprint does not. It's an add-on.  In the cloud storage war, though Sprint got in the game in late January with a partnership with Pogoplug, it now  provides a measley 5GB (compared to AT&T and Verizon) but its $5 unlimited storage add-on is compelling for some.  Finally, with all this competitive noise, Sprint needs to complement its Framily marketing to fight the increased marketing from all competitors.  

• All competitors will still have to deal with T-Mobile's announcement (Odd there wasn't an UnCarrier number associated with it) of free international in-country texting. This little detail will be significant for multinational business accounts whose employees roam.  Competitors have until March 23 when this gets implemented.

It's likely that the wireless landscape will continue to evolve in 2014 and adjustments will continue until an inflection point happens when everyone realizes that margin erosion will dampen their 2014 guidance. But then again, many CFOs explain that competition is already baked into these numbers.