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Mobile Carriers Shake up Billing Structures to Stay Profitable

TMCnet Feature

July 22, 2014

Mobile Carriers Shake up Billing Structures to Stay Profitable

By Steve Anderson
Contributing TMCnet Writer

With the mobile landscape as a whole in a fairly rapid state of flux, it's easy to see that what worked even just five years ago isn't likely to work now. Investment strategies, employment strategies, and everything in between has been shaken up and needs almost constant re-evaluation in the face of change that is still ongoing and likely will continue to be so for some time to come. Mobile carriers are no different here, and though the ways the companies make money has changed, often substantially, there's still money to be made in the field.

Back when mobile devices were really getting started, companies charged customers mainly on the basis of phone calls while allowing unlimited data access, seeing as there really wasn't much for that data access to actually access in the first place. This worked, and worked well, for some time, until customers started flocking to data access—since there was quite a bit more data on hand to access—and making many fewer phone calls, instead sticking to text messaging and data functions. That made companies switch the concept around, offering unlimited calling, but charging based on the data plan.

A report from Consumer Intelligence Research Partners suggests that Verizon (News - Alert)'s come out farthest ahead on this move so far, featuring both the most customers paying over $200 a month in total phone costs, but the company also has the lowest percentage of customers on the unlimited data plan. Verizon also, essentially, ranks highest in customers paying over $100 as well, with an aggregate total of 51 percent paying at least $101 a month, while the next highest such total, Sprint (News - Alert), has only 47 percent paying between $101 and $200 a month, with no one paying over $200. So therefore, more customers are paying for actual data used, and bringing in not only more revenue but also more profit for Verizon.

While AT&T (News - Alert) and Verizon have been, at last report, trying to get more customers on metered data, including data plans shared across a family or similar group, Sprint and T-Mobile (News - Alert) seem to be sticking with unlimited data plans, with large portions of the membership involved in such plans. While just 22 percent of Verizon's subscriber base, at last report, is on an unlimited plan, 44 percent of AT&T's holds such a plan, and both Sprint and T-Mobile alike come in at 78 percent.

Some, of course, might suggest that this is a problem, that Verizon's data limits are entirely too narrow and Verizon's making its profit on the backs of mobile subscribers who want to have enough data to work with while in the field away from a Wi-Fi connection. But by like token, there are those that suggest the unlimited data plans offered at Sprint and T-Mobile aren't really so unlimited after all, that throttling—the intentional slowdown of bandwidth after a certain point is reached—often renders the connection unusable after a certain point. But there will always be a variety of opinions when it comes to something as far-reaching as a data plan, and always those who disagree with the current strategy whatever its form.

A business must be profitable in order to survive and continue operation. While the means to achieve this profitability can be different from one business to another, the end result must be the same. Profit, and by extension cash flow, is the lifeblood of business, and regular changes must be made in order to ensure that optimal profitability.

Edited by Maurice Nagle

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