Wednesday, April 9, 2014

Mobile to Mobile: Healthy Competition Among Mobile Carriers

T Mobile TV Commercial 'Break Up With Your Carrier' song by Black Lips, 2014

T-Mobile has recently become stiff competition to AT&T and Verizon in the mobile industry by changing the way consumers pay for their wireless service as well as WHAT they pay. T-Mobile’s strategy to lure customers away from Verizon and AT&T has used the most central of Porter’s Five Competitive Forces: Rivalry. (1)

Through rivalry by way of price-cutting, customers–some without taking any actions–are seeing the benefits of this competition. While Verizon’s organizational value is to have the most reliable network, even they have “been dragged into the fray.” (2) In keeping up with T-Mobile’s price cuts, AT&T dropped the price of their family plan (3), which prompted a similar move from Verizon. (4) As Porter states in his article, “Price cuts are usually easy for competitors to see and match, making successive rounds of retaliation likely. Sustained price competition also trains customers to pay less attention to product features and service.” (5)

While this competition is good for the consumer, will it decrease the profitability of the industry? The answer seems to be no. Although consumers are seeing price decreases, revenue in the industry is still rising. The price cuts have not yet “translated into a decline in the average revenue Verizon gets from each subscription.” (6) This trend is expected to continue as the price declines in the service fee are encouraging more consumers to make the switch to smart phones and add other electronic devices to their plans. (7)

With the rapid changing pace of technology and the lack of brand loyalty millennials have been know to show towards companies, it will be interesting to see how this rivalry changes and which competitive forces will step in to the forefront among mobile carriers after the pricing wars bottom-out.

1) Michael E. Porter, “The Five Competitive Forces That Shape Strategy,” Harvard Business Review, January 2008.
2) Scott Moritz, “In Verizon’s Price Battle with AT&T, Consumers Get the Spoils,” Bloomberg, Apr. 5, 2014, accessed Apr. 7, 2014, http://www.bloomberg.com/news/2014-04-04/in-verizon-s-price-battle-with-at-t-consumers-get-the-spoils.html.
3) Michael Andronico, “Family Plan Face-Off: What’s the Best Deal?,” LAPTOP, Feb. 6, 2014, accessed Apr. 7, 2014, http://blog.laptopmag.com/best-family-data-plans.
4) Scott Moritz, “In Verizon’s Price Battle with AT&T, Consumers Get the Spoils,” Bloomberg, Apr. 5, 2014, accessed Apr. 7, 2014, http://www.bloomberg.com/news/2014-04-04/in-verizon-s-price-battle-with-at-t-consumers-get-the-spoils.html.
5) Michael E. Porter, “The Five Competitive Forces That Shape Strategy,” Harvard Business Review, January 2008.
6) Scott Moritz, “In Verizon’s Price Battle with AT&T, Consumers Get the Spoils,” Bloomberg, Apr. 5, 2014, accessed Apr. 7, 2014, http://www.bloomberg.com/news/2014-04-04/in-verizon-s-price-battle-with-at-t-consumers-get-the-spoils.html.
7) Ibid.

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