Holiday Greetings from Charlotte (this week’s Davidson College vs. UNCC basketball game is pictured) and Dallas.  Everyone is getting into the spirit of Christmas, especially the wireless service providers.  This week, we’ll cover the promotions landscape and dive into some of the deeper trends that will impact the industry in 2016.

Promotions, Anyone? 

Anyone who is looking for a deal in wireless this Holiday season is going to find one, especially if you switch.  Most of these deals are focused on new lines of service and ported devices.  Here’s a sampling of the most common deals available (by carrier):

1. T-Mobile’s iPhone 6S promotion targeted at AT&T customers: 128 GB iPhone 6S (regularly $850) for the price of a 16GB model ($650) through December 13, with the $200 difference applied as a bill credit within 90 days.  For those of you who are not iPhone pricing structure followers, one of the things that upset the iPhone faithful was that Apple kept the same storage and pricing structure for the 6S as they did for the 6 (while this might sound Scroogish, Apple made a lot of other improvements).  No more 64GB for the price of last year’s 32 GB model – this time it was a straight up trade.  T-Mobile’s offer changes this dramatically, and, while focused on AT&T customers (at least those who have not already upgraded to the iPhone 6S), it’s a good move.  Deal Value:  High, but limited to AT&T iPhone customers who have not switched to the 6S.  Deal Impact:  Lower than expected.

 

(Editor’s note:  T-Mobile ran a similar upgrade promotion for all new iPhone 6S orders on Cyber Monday – 64 GB for the 16 GB price, 128 GB for the 64GB price.  $100 less impact than the AT&T promotion, but another good deal nonetheless for all of those iPhone 6S fence sitters).

2. T-Mobile Ups the Ante for Sprint Switchers. T-Mobile also ran an aggressive promotion over the Thanksgiving Holiday, offering an additional $200 to any Sprint/ Boost/ Virgin Mobile line who switched to the Seattle-based carrier.  This is on top of the standard $650 in porting credits and early termination fee (ETF) payoffs that have been a long-standing part of the carrier’s offer.  While it is a “limited time offer,” no expiration date has been cited.  Deal Value:    Deal Impact:  Marginal.

3. T-Mobile Extends Unlimited Data to All Existing Simple Choice Users (with a slight catch). There will be joy wth many T-Mobile customers when they use their network this winter, as all existing Simple Choice customers get automatically upgraded to Unlimited Data through February.  The catch is that customers cannot change their plan (why would they?) and they need to keep the Binge On feature (480p data) activated for the 90-day period.  For the majority of smartphone users who do not regularly use their phone as a video player (and who have limited “pass backs” for cars, etc.) this is a very welcome deal.  It could also be an indication that T-Mobile expects strong customer orders from the other promotions (and their new Simple Choice plans) and wants to have customer service focused on activations.  In a more cynical light, this could be an indication that existing customers are going to have a slight bit of turbulence as their customer mix changes to heavier video users and that this is a 90-day gift to stem churn.  Deal Value:  Big deal for existing Simple Choice customers, especially Google/ Facebook users.  Deal Impact:  Churn eliminator.

4. Verizon offers 2GB bonus data per line for new phone additions or upgrades to XL/XXL plans. The nation’s largest retail wireless carrier is not immune from offering a little holiday cheer to their base, and they are doing so through January 6.  Since going to a more simplified pricing struture in August, Verizon has been adding and upgrading their XL (12 GB) and XXL (18 GB) plans.  Given the growth of data, many families are looking to switch plans to avoid overage charges.  For a family of 4 struggling against caps for their 6GB Large plan ($60 + $15/ line = $120 assuming this was an existing customer), upgrading to the 12GB X-tra Large plan might have been a stretch (the $15/ line fee goes up to $20/ line for many customers).  But with the extra 2GB per line for as long as you stay on the plan, 20GB for $160 is a strong value for existing customers = 14GB additional data per month for $40.  Deal Value:  Good for existing customers.  Deal Impact:  Churn reducer.

Editor’s note:  Verizon also had terrific Black Friday promotions for Android lovers, with the Samsung Galaxy S6 for $3.16/ mo., the S6 Edge for $7.16/ mo. and the S6 Edge Plus for $15.33/ month.  These are Equipment Installment Plan (EIP) prices, not lease rates so the residual value accrues to the consumer.  All three of these devices can take advantage of Verizon’s XLTE network.

5. Sprint’s LG Free TV Offer. Sprint’s “Cut Your Bill in Half”  is their lead, and it’s likely to be the most impactful offer this season (no scanned bills, more inclusive, and simple math).  Not sure how this helps Sprint grow profits, but for now, both analysts and customers seem to be drinking the Sprint egg nog.  Sprint has also been very aggressive with their base with iPhone 6S lease rates and free tablets which are likely stemming churn.

 

The LG Free TV offer was unexpected, however.  All existing customers who qualified, and all new customers switching to Sprint and purchasing an LG G4 for $18/ mo. (lease) were eligible to receive a free (S&H included) 24 inch LG TV.  Granted, a 24 inch LG TV has minimal value in today’s 60+ inch culture, but it is one of those things that stimulates in-store switching (e.g., customer likes Android but is torn or at least indifferent between a Samsung, HTC or LG.  “How about a free TV?”).  It kind of got us thinking about the sequel offer (wall ovens, washer/ dryers, laptops – the choices are endless), and I’ll leave you, the readers to devise your own “Buy One, Get ______ Free” offer.

On a more serious note, Sprint missed a huge opportunity here with their likely long-term partner, Dish Networks.  Simply receiving an HD TV is one thing, but its connection to the Internet and broadast networks is another.

What’s interesting about the plethora of wireless offers above is the absence of AT&T.  Their Black Friday special revolved around refurbished devices and subsidized plan (free phones with 2-yr commitment, not EIP) specials.  While AT&T’s post-DirecTV merger offer from the summer (4 receivers + 4 phones + 15 GB for $200/ mo.) still stands, their wireless efforts seem a bit light compared to their competitors.   Given the rumors swirling about a DirecTV name change (see here and here), AT&T might be waiting until the busy video/ broadband promotions season (Jan-Feb) to roll out new offers.

Bottom line:  Lots of promotions smoke, but little overall fire.  T-Mobile’s Binge On and Sprint’s “Cut Your Bill in Half” offers will have the broadest appeal, but there’s very little moving the largest carriers to cut rates or extend promotions to their base.  The Apple iPhone6S appears to be the big winner thanks to Sprint and T-Mobile’s lease offers (and presumably seasonally-driven upgrades at AT&T), but Samsung should get a bit of a bump thanks to Verizon.  And LG might see a slight electronics bump (I still don’t get that one).

Big Trends For 2016 (Part 1):  C is For Consistency

The wireless industry is filled with a lot of change:

1. Bidding on spectrum
2. Clearing spectrum and then deploying networks/ capacity that use this spectrum
3. Promoting devices with aggressive financing plans that take full advantage of new networks
4. Deploying backhaul from cell towers and small cells to data centers that hub or contain desired content
5. Deploying denser networks to satisfy specific in-building/ regional needs
6. Delivering enough bandwidth to drive up usage and ARPUs (and praying that customers will not notice that their total spending is going up when wireless carriers announce their Average Billings per User)
7. Repeating steps a-e

This cycle is driven by a Moore’s Law equivalent in wireless:  That bandwidth (download and upload) speeds will at least quadruple with every network refresh. The original 1XRTT CDMA networks delivered 40-60 Kbps, EVDO on CDMA networks delivered about 200-300K (5x), EVDO-Rev A on CDMA networks delivered about 1.0-1.5 Mbps (download only, about 5x), and the first LTE networks delivered 4.0-8.0 Mbps (download, about 4-6x).

The next generation network (XLTE, T-Mobile’s 700 MHz, and Sprint’s LTE Plus networks) deliver anywhere from 20-40 Mbps downstream with growing consistency (see Atlanta’s 2H 2015 RootMetrics report for a good example – Sprint had 19.2 Mbps average downstream speeds and placed last), and 5G networks promise speeds up to 100 Mbps.  The next generation, spurred on by increased carrier aggregation and other innovations such as LTE-U, would imply a 500 Mbps rate.  While that may seem like a stretch to many of you, none of us saw a consistent 40 Mbps coming throughout a major metropolitan market in 2015.

In 2016, the name of the game will be consistency.  Can carriers deliver high data speeds without compromising voice and text quality?  The verdict is out for T-Mobile as Verizon and Sprint are consistently beating them in voice quality in the 2H RootMetrics reports.  Of the last 125 market scores recorded, T-Mobile’s score trailed the Call Quality winner by at least 3.0 points in 69 or 55% of them (T-Mobile won 26 or about 20% of the markets).

Can Sprint be known for (good) data consistency with the rollout of LTE Plus?  In the 2H 2015 RootMetrics reports, Sprint trails the market leader in network speed in nearly every market (Denver and Corpus Christi being the two exceptions).  That’s consistency of a different nature.  See the latest results for New York City and the Tri-State area nearby for an idea of how far Sprint needs to come to be “in the range.”  The New York results are not an outlier – see here and here and here for three recent Sprint last place finishes where Sprint trails the market leader by 25-30 points on Network Speed.

Lastly, can Verizon’s proven consistency translate into phone growth without compromising margins?  So far, Verizon has managed to grow connections per account and keep their enterprise business intact.  Can small cell and in-building deployments justify their premium rate?   Will the organizational changes that Verizon recently implemented result in diminished local focus?

Consistency requires strong cooperation and coordination between networks and content.  It requires superior engineering and a local market operations focus.  Most of all, with current market growth, it requires investment and patience.  Service consistency is a prerequisite for long-term market leadership.  The jury is out on who will best manage change and deliver consistent operating results, and the victor will be determined in 2016.

Next week, we’ll explore another key element to creating competitive advantage:  technology leadership.  Until then, please invite one of your colleagues to become a regular Sunday Brief reader by having them drop a quick note to sundaybrief@gmail.com. We’ll subscribe them as soon as we can (and they can go to www.sundaybrief.com for the full archive).  Thanks again for your readership, and Go Davidson Basketball!