By now you've probably heard that it will shortly be impossible to pay more than US$100 a month for cellular voice service on any given line (I wonder, BTW, what term will eventually replace "line"?). Verizon Wireless (leadership again here) started it all, and was quickly followed by AT&T and T-Mobile. We're just waiting for shoe #4, from Sprint, to drop, and there's already talk of a price war beginning here fairly quickly. The cellular carriers have traditionally done a pretty good job of balancing supply and demand by using price to limit the latter while continue to build out the former, and such was easy while demand was rising. But the market for cellular voice is now saturating and is quickly becoming commoditized, even though it's clear that some carriers have better coverage and capacity than others. But that differentiation will regardless shortly be history (Verizon no longer runs the "can you hear me now?" ads), and, as commodities are differentiated only by price, a price war may indeed be in the offing, again, sooner rather than later. Note, however, that there are still many other pricing plans available and few of us really need unlimited service. While I still object to the pay-in-advance, use-it-or-lose-it (with the exception of AT&T's rollover, a carryover from Cingular), there's no denying that cellular services prices have fallen significantly over the past few years, and we now have an (albeit high, but much better than before) ceiling on what we can pay.
Nonetheless, in industrialized markets and especially the US, anyway, essentially everyone who wants a cell phone now has one. The competition for new customers thus shifts to data services, and prices there have been fairly stable - $40-$60/month is common, and I don't see that changing in the near future. Data remains a problem because broadband is now a requirement, and it's going to take the next leap forward - to LTE - to get the spectral efficiency needed to begin to even think about lower prices for data. Remember, price is used to limit demand to what the carrier can reasonably provision while meeting reasonable user expectations. It's not that different from OPEC, but without the collusion (I hope).
So what's really interesting here is the effect that the fixed-price, all-you-can-eat plans will have on two other constituencies - wireline service and pay-as-you-go cellular. Wireline service is now fairly expensive - including the absurd level of taxes and fees, $60/month is not uncommon for unlimited local and long-distance calling. So we need only a small decline in the unlimited cellular plans - to about $80/month, I'm guessing, before landlines really take a hit and the knee in the hockey stick appears in the curve showing the shift from landlines as primary to cellular as primary. I'm assuming $20/month in convenience-factor cost will be acceptable to most customers. Sure, you can't beat landlines for reliability, but many can get rid of them altogether as cellular voice prices fall - and they will if the price war materializes, and it will, in some form, and soon. Sorry, webcast operators, no more demanding that we use landlines when we present; we just won't have them. I think, BTW, that dual-mode handsets and Wi-Fi will pick up the in-building slack, and these connections are quite good and, properly configured, quite reliable as well.
As for the prepaid cellular guys, these plans are also getting more reasonable, and will likely become the default for those who either don't want full-time unlimited cellular or who find the remaining pay-in-advance/use-it-or-lose-it terms unacceptable. While these operations have traditionally appealed to the poor-credit crowd who couldn't qualify for a regular cell-phone plan, and featured ridiculous terms of their own reminiscent of all those subprime mortgages now plaguing the rest of us, a few carriers now offer simple and very fair terms - $.10 a minute, with no hidden charges. Remember when dinner every night was interrupted by some telemarketer offering ten-cents-a-minute long-distance service? That's today's upper bounded on cellular time, and this too will decline, perhaps making cellular the default for literally everyone. For examples, see Net10 (I just love their ads, which call the cellular companies "evil")and their parent TracFone Wireless. These guys still need a wider selection of handsets, but that's not really all that important given their target audience at present.
So, unlimited cellular has a number of impacts far beyond the I-don't-care-what-it-costs crowd and business users looking for predictable monthly charges. We're all going wireless, at least for voice, all the time, and perhaps sooner than most thought just a week ago.
Mathias is a principal at Farpoint Group, a wireless advisory firm in Ashland, Mass.
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