Verizon Wireless Begins the Unlimited Voice Pricing War, Not Sprint

| Feb 19, 2008 | U.S. Wireless Research Portal | Competitive Intelligence Report

| Analyst: Bill Ho

Current Perspective: Positive
Vendor Importance: Very High
Market Impact: Very High

Event Summary

Verizon Wireless has let the genie out of the bottle with a $99.99 unlimited calling plan. The question is not whether competitors will react, but when and how quickly. Will the game of one-upmanship play out in the coming weeks?

Analytical Summary

• Current Perspective: Positive on Verizon Wireless’ new $99.99 Nationwide Unlimited plan, because Verizon Wireless has taken the offensive, launching the equivalent of a nuclear pricing war and leaving its competition off-balance – at least for the short term. As such, we expect VZW to enjoy a period of strong subscriber growth and even stronger publicity.

• Vendor Importance: Very high to Verizon Wireless, which has taken the plunge into an unlimited voice pricing market. While this certainly gives the carrier a major head start, it also raises questions regarding how the carrier will follow up on this move in terms of further data offerings or data promotions that will drive ARPU.

• Market Impact: Very high on the wireless services market, as this is the first major provider to launch a national unlimited calling plan (not promotion). As such, this has the potential to be a game-changing move and all other carriers will be forced to react in order to defend market share.

Recommended Competitor Actions

• All competitors should match Verizon Wireless’ offering and look to create voice-bundle variations. Invariably, a large subset of unlimited voice calling candidates would also lean towards data.

• All competitors should look into providing a way to add family lines to share unlimited calling where it will not wreak havoc on margins. This is a time when additional line costs may increase from the ultra-low $10 per month.

• Alltel and T-Mobile should be pushing the value of unlimited calling across all of their My Circle and myFaves plans. Both carriers should – not unreasonably – point out that a combination of unlimited calling to specific numbers (myFaves/My Circle) as well as a large pool of anytime minutes equates to exactly the same thing as unlimited calling. Furthermore, both carriers should point out that the myFaves/My Circle solutions apply to lower tiers of customers, while the Verizon Wireless solution only applies to a very small percentage of customers willing to spend $100 (plus taxes) each month.

• T-Mobile should be specifically pushing Hotspot @Home and touting the low $10 add-on price for unlimited calling in WiFi environments, even abroad. This is a calling and pricing differentiator that Verizon Wireless and other competitors cannot match, especially against Verizon since the carrier has no WiFi assets.

• Helio should take advantage of Verizon Wireless’ media buzz to highlight that its All-IN Unlimited Plan not only includes unlimited voice calling, but also unlimited data for a promotional price of $99. It not only includes unlimited data and messaging, but it is also less expensive by $0.99.

Recommended End User / Customer Actions

• Verizon Wireless users who are already spending $100 or more on their voice plan should strongly consider changing over to Nationwide Unlimited plan for the unlimited calling proposition. Furthermore, they are likely to lower their monthly voice outlay and with the savings can opt for other data services to enhance their mobile experience.

• Customers at other carriers looking for nationwide unlimited calling, and looking to jump carriers, should look into Verizon Wireless’ Nationwide Unlimited offering. They should also assess how the impact of an early termination fee may hit their bottom line. However, if customers are happy with their carriers, they should sit tight since their carrier will more likely offer a competitive response to Verizon Wireless.

• All customers interested in unlimited voice calling should know that there are other choices out there besides Verizon Wireless’ Nationwide Unlimited. Alternate offerings include Helio’s All-In Unlimited plan ($99 promotion), which also includes unlimited messaging and data, Sprint’s Unlimited Access Pack (in certain markets) at $120, and T-Mobile’s myFaves plans with a Hotspot @Home add-on for $10.

• Customers who are more data-centric should look into voice-data bundles that provide some sort of discounted overall package. The other news in Verizon Wireless’ announcements centered around new bundles that will decrease the cost of data and e-mail on PDAs and BlackBerrys as well as new laptop options.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

Recommended End User / Customer Actions

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