How mobile phone plans will be developed and sold in the very near future
Buy a plan through T-Mobile, and you get every song ever recorded. In the future, consumers will choose plans based on which carrier offers free MLB, NFL, Twitch, and Netflix.
by Dan Chaparian (@danchaparian)
On Saturday night, a man sat down on a bench next to me. He pulled out his phone and began playing dancehall reggae music through the speaker. Crowds of people streamed up and down the block, most headed to a Saturday night function — a party, a bar, a train ride to something similar — and this guy had the right idea. He sat on a bench and relaxed, watching the crowds, smoking a cigarette, listening to some music.
If my bench friend had a phone plan through T-Mobile, he could listen to any dancehall song ever recorded, without worrying about whether his bill might make him cringe. T-Mobile recently introduced its “music free” plan in which customers will not incur data charges for streaming music through Spotify, iTunes Radio, Pandora, Slacker, and more. In essence, with T-Mobile, you’re buying more than a phone. You’re also buying every song ever written.
I don’t know whether this plan is a loss-leader for T-Mobile, but I know it is a sign of things to come. Spurred by the need to grow and compete in the ultra-competitive wireless industry, third and fourth place carriers T-Mobile and Sprint are now led by charismatic CEO’s and will inevitably test new, creative, and differentiated strategies for acquiring customers. French carrier Iliad is bidding for T-Mobile to do just this:
“The competitive landscape in the U.S. is a lot less aggressive than what we are used to in France,” Mr. Niel said in an interview. “There is enormous potential. It is almost too good to be true.”
To survive, carriers need to bust the established ways of doing business. T-Mobile and Sprint need to disrupt. AT&T and Verizon need to innovate, but not quite cannibalize. Let’s address how they should market their plans to customers.
Today, wireless carriers still try to sign up and retain customers by boasting about quality. Many television commercials these days use phrases like better network, fastest network, largest network, most coverage, coverage anywhere, etc. You’re familiar with these messages because wireless carriers always rank among the highest spending advertisers in the country.
I find it hard to believe that customers choose wireless carriers based on quality, network coverage, or even speed. It’s true that there are differences in connection quality from carrier to carrier, but most customers don’t notice or don’t care. (Keep in mind, millions of wireless customers are not as tech-savvy as you might be and may not know diddly-squat about network strength.)
Quality, network coverage, and speed are cold, emotionless attributes with zero human connection. You will never hear a 17 year-old brag to his/her friends: “I get the best coverage with this phone.”
Also, data plans are becoming a nuisance for both consumers and carriers. Consumers are beginning to pay attention their data usage. I can speak to this first-hand.
I recently left an employer who was paying for 100% of my phone costs. I never thought twice about streaming music, mobile video, turn-by-turn directions, or browsing the web. Upon leaving, I chose a plan with 2GB of data and began closely restricting my activity so as to not be hit with an exorbitant surcharge. Now, when driving, my girlfriend and I stream music through her phone because she still has an unlimited data plan.
So, you’ll never hear a 17-year old say “I get the best coverage with this phone.”
Something more natural: “I get free music with this phone.”
Or “This phone comes with free Twitch and YouTube.”
Or, “I went with them because they offered the sports package — I don’t have to pay for MLB.TV. NFL Now, or NBA TV.”
Switching costs in this industry are incredibly high. Better coverage is unlikely to get people to move carriers, but giving them the apps and content they want for free might do it. In a survey of one (me), if someone offered me a wireless plan that didn’t charge me for MLB.TV, I’d dump my carrier and sign up tomorrow.
As more and more content arrives on mobile phones, and more content providers go “over the top” like MLB and Netflix, the carrier who acquires and retains the most customers will be the carrier who allows users to enjoy this material on his/her terms. Moreover, customers are already paying subscription fees for many of these services. Customers should not have to pay Netflix one fee and Verizon a second fee to watch House of Cards.
The biggest risk relates to the growing net neutrality concern in the United States. If the FCC allows carriers to strike deals with content companies and give them favorable treatment over their spectrum, it sets the stage for a nauseating landscape of deals that will inevitably leave the landscape fractured, and it will stifle innovation. You can imagine a world where Verizon gave MLB priority access on its network, but AT&T paid more to the NFL to secure an exclusive deal, and the NBA went with Sprint.
Good luck getting that sports package if that happens.
In order for this to succeed, agreements need to be made with the consumer in mind. The consumer must receive the most favorable treatment. If carriers put the customer first, it will enable them to grow their subscriber base, own the customer relationship, upsell countless new services, and profit more (and more sustainably) than just by signing the biggest 5-year content deal in 2015.
T-Mobile’s “music free” plan is just the first example in what will surely be a sea change toward wireless companies offering consumers specific content packages. That is, if the carriers themselves allow it. These companies don’t exactly have the best history of putting the consumer first, and as a wave of mergers and consolidation sweeps through the media business the consumer’s voice may diminish even further.
The saving grace? This is a hyper-competitive growth market. Sprint and T-Mobile have publicly stated that they want to disrupt the industry in order to grow. Iliad is bidding for T-Mobile. As competition heats up, carriers might find their hands forced and realize that the old way of doing business no longer works. In that scenario, the consumer could end up the winner.
