The plan by AT&T has made sense from the beginning. The company agreed to buy DirecTV in June 2015 as a way to provide more compelling offerings to its customers. AT&T was already contending, on one hand, with Verizon, which was attracting customers with its triple play offerings of cable, phone and wireless. On the other hand, T-Mobile’s aggressive marketing and offerings of inexpensive no-contract phone service were costing it customers.
It was last year, after all, when T-Mobile overtook hapless Sprint to become the third-largest wireless carrier in the United States through a series of what the company calls “Uncarrier” moves that eliminated contracts, provided dramatically reduced costs and included a series of other moves, such as free unlimited data nearly anywhere in the world.
While AT&T is still far larger than T-Mobile, the trend was clear. T-Mobile was growing, and AT&T wasn’t growing as fast. Worse, AT&T was rapidly becoming irrelevant in the world of wireless. No surprise, then, that the company had to do something to regain at least some of its former initiative.
What AT&T has done is to emulate T-Mobile. Contracts are gone, customers can buy phones on an installment plan, and they can switch carriers whenever they wish, as long as their phones are paid for. This is a big deal for customers, since these days the differences between an AT&T phone and any other phone are essentially non-existent.
The differences between AT&T and T-Mobile are minimal anyway since both carriers use GSM for their voice calls, and for the most part, they share frequency bands. In fact, the only difference in Apple’s iPhones is one extra Long-Term Evolution (LTE) band for AT&T. In all other respects Apple makes the same phone for everyone. All that’s required to change carriers is to change to a new SIM card.
By acquiring DirecTV, AT&T is able to sweeten the pot for phone owners by offering combo deals to people who also want its video service. While AT&T already has the U-Verse cable service, it’s not really a nationwide offering. By adding DirecTV, AT&T can offer deals to nearly everyone in the United States.
The only thing standing in AT&T’s way was T-Mobile’s unlimited data offering. For AT&T, the way to make this all work is to offer unlimited data to its customers of video services. This way, AT&T can compete, at least to some extent, with T-Mobile and its growing offering of free streaming music and video.
But this isn’t to suggest that AT&T and T-Mobile are just alike. T-Mobile doesn’t have a video programming service, for one thing. For another, the definition of what constitutes unlimited data can be somewhat different. For T-Mobile, the idea of unlimited data applies to 2G and 3G data; 4G LTE data is still limited to some extent under most plans. With T-Mobile’s highest-priced plan, $95 gets you unlimited 4G LTE data unless the specific cell site is congested, in which case your data is throttled if you’ve used more than 23GB of data.
AT&T Makes Another Attempt to Be Like T-Mobile
At Verizon, the only unlimited data belongs to customers who have had it for the last four years, and even there, it’s going up in price by about $20 per month as the company tries to find ways to get rid of its unlimited customers.
At this point, AT&T has put itself into a pretty solid place in the market. It’s got a way to leverage users of different services into staying with AT&T. In addition, the company has more ways to get the attention of customers, and more ways to encourage loyalty. In a sense, it’s a better position than Verizon’s in, because that company’s only path to video and Internet use is with its FiOS service, which depends, in turn, on fiber-optic infrastructure that’s still being built-out, but which will never expand much farther than it is now.
T-Mobile, meanwhile, has been in talks for some time to join with Dish Network, either through an acquisition or a joint marketing agreement, as a way to offer video programming services to its customers. While a T-Mobile/Dish deal has been an on-again, off-again topic of discussion for many months, the move by AT&T may play a pivotal role in getting the two companies to get off the dime.
The next question is whether competition by both AT&T and T-Mobile with their unlimited data will cause Verizon to reverse course and start offering unlimited data as well. It may seem unlikely, considering Verizon’s size, but it wasn’t that long ago when Verizon also dropped all contracts, and started offering a purchase program similar to T-Mobile’s.
It’s worth noting that a change to unlimited data isn’t all that hard for wireless carriers to implement. The biggest impediment is really more about the finances than anything else. Providing unlimited data really doesn’t cost the carriers anything. The tiered data plans of yore were really just a way to suck more money out of the customers’ pockets than they were about costs experienced by the carriers.
What this means is that the only real cost for Verizon to join the crowd in the unlimited data camp would be a small hit on profits. That’s not necessarily too big of a hit to protect market share. If that happens, the battle between AT&T and T-Mobile will manage to net some big returns for Verizon’s customers.