Pricing wars – desperation in the morning?

No-one is under any illusion that the situation in the United States is becoming ever tenser. The battle to keep customers is forcing carriers to try tactics that seem seriously deranged. Just last week Sprint launched its ‘cut your bill in half’ which was analysed by our sister publication, DisruptiveViews – conclusion: the deal was not as simple as it seemed at first glance. The gauntlet has been laid down.

Now, the Wall Street Journal (reported here – no paywall) has reported that the largest carriers in the US have lost $45 billion in value in the last month. We have seen a similar situation in Europe, where operators’ revenues are down across the board. That said, they are holding their value better than their transatlantic cousins. Possibly the analysts in Europe are clearer on the upside – and are basing their valuations on collaboration with a variety of partners.

The gloomy outlook in the US stems from the amount and cost of data traffic, which is already a commodity. Although the carriers that have launched innovations such as shared data plans are seeing reduced churn, churn is still up on last year.

The answer, as we know, lies in collaboration. Collaboration gives operators the path out of commodity pricing because it transforms their offerings from services (access, data) to products (video, music, games). Products are easier to buy. We also know that the potential of combining information with partners provides the door through which sensible, context based offers can be launched. Knowledge of device and data usage, combined with knowledge of what the customer likes doing, and, crucially, is about to do provides operators and partners that magic mix.

The problem is that it may be too late. Operators have already gone down the commodity path and it is difficult to see a way back. Competition is dictating a price war and so the focus must be getting more out of less and doing everything you can to keep customers, even at a loss, so that you can figure out how to make money out of them again at a later date.

2015 looks like being a nerve-wracking year for many operators and the situation is going to become more interesting when Vodafone launches an MVNO on the back of T-Mobile. That will be one to watch and might also be the way that Vodafone finally gets into the US market – and buys T-Mobile.

In the meantime we can only hope that a longer term view, based on partnerships, is holding its own in the carriers’ corridors. If business models based on sensible partnerships and knowledge sharing can be designed, and these can be layered on top of commodity data pricing, then maybe there is a glimmer of light somewhere in the next year or so.

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About Alex Leslie 400 Articles
Alex was Founder and CEO of the Global Billing Association (GBA), a trade body focused on the communications sector. He is a sought after speaker and chairman at leading industry conferences, and is widely published in communications magazines around the world. Until it closed, he was Contributing Editor, OSS/BSS for Connected Planet.

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