The WAR has started - at least in earnest

The American mobile phone consumer got a nice shot in the arm over the weekend as Verizon and AT&T had a go at their respective unlimited voice service prices. Verizon, the nation’s largest mobile phone company by customer, fired the first shot when it announced changes to its unlimited voice and data plan. The company reduced the price of its unlimited data plan from $99 to $69 and and $29.99 for unlimited data. AT&T responded shortly after matching the Verizon numbers.

On the surface, this can either be viewed as price fixing (both companies were earlier questioned about price fixing by the FCC in 2009) or as a price war. But a closer look will show that the companies are simply in a race to save their respective businesses from more recent entrants into the US mobile phone market and of course to T-Mobile. Early this week, T-Mobile announced a new price for its unlimited voice at $59 and it was only going to be a matter of time before the big two respond. Cricket has been touting unlimited data plan at $49 since early 2009 and the whole unlimited service plan was given real life by Sprint in 2008.

It seems with this new found zeal to lower prices for unlimited calls, the US market is finally moving in the direction of the rest of the world where incoming calls are not billed. American companies have always found a way to milk their customers for as long as possible as is evident in every market from pharmaceuticals to mobile phone devices and phone vendors. The heat in the mobile phone industry continues, but the carriers continue to be the better off for it. Verizon has almost 90 million customers despite the fact that its unlimited voice, data and text service used to be almost twice the cost of the Sprint offering, and even with the new price cut (amounting to 30% for unlimited data) , its price is still $20 more expensive than Sprint’s price but without the price certainty. Verizon’s new pricing scheme does not include unlimited data. Data is now charged at $9.99/25MB and subsequent data access will cost more. In a statement, Verizon points to voice as a commodity in the new market and data as the king.

While the US mobile phone industry approach subscriber saturation, the vendors continue to gouge customers with exorbitant fees, including Verizon’s recently increased de-activation fees and Industry commentators seem to make matters worse with their often confusing characterization of events. Indeed, the latest price cut by the two leading vendors is not so much of a war, but a price realignment to meet their vision of where the customer should be pinched next. Indeed, they nearly acted in concert showing there is more likely a collusion than a war. Both companies haven given the world a show of discord in the weeks leading to their new “price – war”.

There’s a price war in the mobile phone Industry though, but it is being waged by the lesser carriers like Sprint, Cricket, T-Mobile and other lesser known vendors. It is yet to  be seen how these war