The wireless industry, like the TV industry before it, is about to come unbundled.
On Wednesday, Virgin Mobile and Sprint announced a new mobile-phone data plan called Custom, a prepaid family plan that lets users grab as much data as they want from either Facebook, Twitter, Instagram, or Pinterest for just $12 a month. For $22 a month, they can get unlimited access to all four. And for an extra $5, they get unlimited music streaming too. It's undoubtedly an attempt by the two companies to grow their market share and lure a lower income demographic to their services, but it's also an early indicator that the telecom industry is about to get the Netflix treatment.
Before Netflix, consumers who wanted to watch television---even if it was just a few channels---had to buy a whole cable package, paying for all sorts of channels they didn't really want. But now that Netlfix will stream an unlimited number of shows and movies over the internet for a flat monthly fee, bundled cable TV packages are becoming passé. Why pay for a big cable package when you can spring for a low-cost service that lets you watch what you want to watch, when you want to watch it?
Now, something similar is happening in the wireless world. With Custom, you don't have to go whole hog. You can just pay for what you want. "Unbundling. Customer empowerment. I think all this is a fundamental long-term trend for the telecom industry," says Rajeev Chand, managing director of Rutberg & Co, a boutique investment bank, specializing in the wireless industry.
>It's an early indicator that the telecom industry is about to get the Netflix treatment.
The Custom plan, which is only available through Walmart, starts at $6.98 per phone line, per month. It then allows users to add-on unlimited access to a select few popular apps for just $5. For another $35, they can add the unlimited talk and text plan. What’s more, customers can change their plans at any time, right from their own phones, and parents can remotely control their kids' phones as well.
Though Chand admits this plan probably won’t appeal to everyone and, therefore, doesn’t pose a major threat to leading carriers like AT&T and Verizon, it is part of a growing movement among smaller telecommunications companies---including Sprint, T-Mobile, and FreedomPop---to make wireless access more affordable.
Once upon a time, the biggest customer selling point was the quality of coverage. Verizon built its entire marketing campaign---"Can you hear me now?"---on the promise of constant coverage. And yet, Chand says, research now shows that cost is becoming increasingly important. As carriers compete to grow their subscriber bases, the major players might have to change their thinking and begin paying more attention to these smaller companies, who are eating away at their market share.
"Will the Virgin Mobile plan in and of itself become a major success that AT&T and Verizon have to alter their plans around? I don’t know," he says. "But is this a market trend toward data plan price pressure, unbundling, and customer empowerment? I absolutely think so."
