By Douglas J. Barnett (dbarnett@atlantic-acm.com)

Background:

AT&T and Verizon have rolled out new wireless pricing packages.

• Differences in Presentation: In marketing their respective new price plans, AT&T and Verizon differ in their pricing presentation strategies. At minimum, both carriers' new unlimited voice is priced at $69.99 and total unlimited package (voice, message and data) is priced at $120 per user, per month. The difference however, is how each package is presented to the consumer. AT&T markets its new package as an all-you-can-eat voice and data plan while Verizon focuses on an all-you- can-use voice and messaging plan. To reach the $120 price point for unlimited everything, then, AT&T customers must add an unlimited text and Verizon users need to add data. ATLANTIC-ACM believes the difference in plan marketing is a direct result of iPhone vs. non-iPhone carrier, i.e. AT&T's primary audience for the new offering is the iPhone Internet browsing crowd while Verizon's target audience is more of the Blackberry type. Further, the new, lower price points for basic voice services will help to combat customer churn for basic customers that are being heavily targeted by mass-marketed, low-priced prepaid plans.
  
  
• New Requirements for Multimedia Devices: While both carriers have reduced the overall prices of their unlimited voice offers, AT&T and Verizon have introduced new stipulations to new multimedia phone users. In Verizon's case, customers purchasing a new plan for their respective multimedia device must purchase, at minimum, the $9.99 per month data package which includes 25MB of data usage. For new AT&T multimedia users, customers must commit $20 per month to a texting and/or web browsing package. These new requirements will help AT&T and Verizon extract more value from customers other than iPhone/Blackberry users.
  
  
• Simplification Drives Efficiency: Although the new price points offered by AT&T and Verizon may affect top line revenue growth, these new plans may help the bottom line by producing efficiency gains. The new price plan offers a simpler understanding of what is, and is not, included in a user's monthly charges. By increasing the transparency of their bills, each carrier will probably receive fewer service calls from customers confused with, or upset by their monthly wireless bills, increasing service center cost savings. Furthermore, AT&T and Verizon will have an easier time training their respective sales forces due to more defined plan options. Simplicity-generated efficiencies have the potential to, at least to some degree, offset pricing declines.

The Bottom Line:

As competition between AT&T and Verizon heats up in the wireless space, it is important to recognize that neither carrier was the first mover to a reduced price for unlimited voice, messaging and data. Sprint Nextel's and T-Mobile's triple unlimited offers have been priced at $99.99 per month, representing about a 17-percent discount on AT&T's and Verizon's new respective offers, for some time. AT&T and Verizon introduced newly required data plans to multimedia device users to counterbalance a potential reduction in top-line revenue growth .  Further, there may be some efficiency gains from pricing simplification.  Look for continued price wars between the major carriers as wireless services penetration is peaking and strategies are centering on capturing and retaining existing premium wireless users on one hand and minimizing revenue loss for basic services from aggressive prepaid pricing on the other.