AT&T and Verizon battle for customers

Wednesday, January 20, 2010 - 11:52am

Verizon and AT&T, the two largest cell phone carriers in the U.S. are gearing up for a price war over cell phone service fees.

And frankly, it's long overdue: Consumers have been radically overpaying for their cellular service since the dawn of time, with carriers protecting those rates through a series of mergers that has left the U.S. with just four major networks to choose from. Until now, only T-Mobile has seemed interested in trying to be competitive when it comes to pricing while the rest of the market has sat on its collective hindquarters.

Verizon fired the first volley on Friday, announcing major cuts to its unlimited family talk and text plan, from $230 to $150 per month, and its unlimited voice plan from $100 to $70 per month. Other plans combining unlimited talk and text are also going down in price. The new rates go into effect today.

AT&T is following suit, lowering the prices of its individual unlimited plans by $30 as well, putting the two companies back into pricing parity. (Today, smaller carrier U.S. Cellular joined the club, too.)

What's not changing? Prices for anyone with a minutes-based plan, or users who have a limited plan with a set number of minutes a month. I don't have any information on what percentage of users that might comprise, but I imagine it's still the vast majority of them.

The question now becomes if and when these price cuts will spill over to the rest of the market, particularly in the fiercely competitive world of smart phone plan pricing. So far the carriers have been reluctant to start hacking away at these highly lucrative plans — although a few iPhone competitors undercut the cost of that phone's plan by a few bucks a month as an enticement.

The other concern raised by CNN in the linked story is what will now happen to smaller players like Leap and MetroPCS, all of which are known for rock-bottom pricing and the primary movers in forcing the big carriers' prices down. Without much room to cut, will we see them try to squeeze a few more pennies out and skirt with financial losses? Or could some of these players actually be forced out of business?

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