Cellphone Bills Go Up for First Time in Nearly Two Years
July 13 2018 - 11:05AM
Dow Jones News
By Sarah Krouse
Americans' cellphone bills are rising for the first time in
nearly two years as wireless service providers pull back on
promotions.
Americans are messaging friends, streaming videos and summoning
transportation and other services on their smartphones more than
ever. Over the past two years, they have benefited from lower bills
and unlimited data usage as national wireless providers have
competed fiercely for new customers.
New consumer-price data suggest the promotion craze may be
petering out. The consumer-price index for wireless phone service,
an indicator of current offers from cellphone service providers,
ticked up 0.3% in June from a year earlier, according to the Labor
Department, the first such increase since July 2016.
Prices for wireless phone service declined so dramatically in
2017 that former Federal Reserve Chairwoman Janet Yellen said it
was a factor in the U.S.'s low inflation.
"In terms of promotional intensity, things have cooled quite a
bit," said Jeffrey Moore, principal of research firm Wave7
Research.
Allan Buxton, who works in Cleveland on digital forensics for
mobile devices and computers at SecureData Inc., has been shopping
for a new cellphone plan but hasn't been able to find a deal that
he thinks is worth pursuing.
About a year ago, several plans looked appealing, but now
carriers "just keep tacking on restrictions," he said. "Everyone
advertises unlimited service. It's not unlimited. The fine print is
ridiculous," Mr. Buxton said.
Executives at Sprint Corp. and T-Mobile US Inc., the two U.S.
wireless companies that had been most aggressive in cutting prices,
signaled earlier this year that they would scale back discounts.
The two companies are now seeking regulatory approval to merge into
a wireless giant with a subscriber base comparable to behemoths
Verizon Communications Inc. and AT&T Inc.
Matt Carter, managing partner at private-equity firm SagePointe
Capital and a former Sprint executive, said Sprint and T-Mobile
have been at the forefront of offering discounted pricing plans to
gain subscribers, but doing so can mean having less money to invest
in network upgrades and pay down debt. Wireless carriers are
investing heavily to develop faster so-called 5G networks.
"At some point in time you have to have some stabilization
around your pricing plans to be able to meet all the various needs
they have," he said. When those two companies cut back on price
discounts, "it allows AT&T and Verizon to hold steady" on their
pricing, he added.
Critics of the proposed Sprint and T-Mobile merger have said the
tie-up is likely to dampen competition among wireless providers by
reducing the number of large carriers, while the companies have
said the combined company will be better able to take on rivals
than as separate companies. Executives have said they would spend
heavily on the combined firm's network and create new jobs.
The vast majority -- 95% -- of American adults now own a
cellphone, according to industry trade group CTIA, and they used
15.7 trillion megabytes of mobile data in 2017, up from 4.1
trillion in 2014.
That presents wireless carriers with a challenge of trying to
keep and win new customers while spending money to grow their
networks so that they can handle the increased demand for data.
Sprint on Thursday announced a new, tiered unlimited plan that
replaced its prior offer of five unlimited lines for $100. The
monthly cost per line for five lines will now be $22 for its
top-tier unlimited plan, up from $20 under the previous
promotion.
Dow Draper, Sprint chief commercial officer, said the firm's new
plans gave customers a choice of a feature-heavy plan with
streaming-video service Hulu and streaming music service Tidal and
a more basic unlimited plan.
"Including that kind of content is becoming important," Mr.
Draper said, adding that consumers' overall bills could be lower
taking into account the services they get through the deal.
T-Mobile last year began offering some subscribers free access
to Netflix. AT&T, which recently completed its deal to buy Time
Warner Inc., offers subscribers of its new unlimited plan a free
"skinny bundle" of television channels and access to other content
such as HBO.
Verizon last month started allowing customers to select
different tiers of "unlimited" data plans within a single family
plan. Angie Klein, vice president of consumer marketing at Verizon,
said that provided customers "even more value because they can get
exactly what they want, without paying for what they don't."
AT&T and Sprint also recently raised the administrative fees
they charge customers, The Wall Street Journal reported last
month.
Write to Sarah Krouse at sarah.krouse@wsj.com
(END) Dow Jones Newswires
July 13, 2018 10:50 ET (14:50 GMT)
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