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Verizon claps back at T-Mobile on pricing strategy

Verizon and AT&T usually just ignore T-Mobile when the Un-carrier takes public jabs at them. But not this week.

Today, Verizon said it “will not sit on the sidelines and watch as the Un-carrier continues to hoodwink consumers by dazzling them with one catchy announcement after another, only to Un-ravel and Un-do them just as soon as people forget.”

Verizon then presents the following timeline, from its perspective, going back to January 2017 when T-Mobile first announced that taxes and fees would be included in plans:

  • “Jan 5, 2017: Announces taxes & fees now included in plans.

  • Aug 6, 2018: Launches Essentials plan. This is essentially a way to bring back taxes and fees.

  • Jan 22, 2022: Fees raised on both consumer voice and data lines (sure seems like a lot of fees for a carrier that cut them out a few years ago).

  • Mar 21, 2022: Connect plan launches without taxes included. But wait, didn’t you say just a few years ago you were doing away with taxes and fees?

  • May 5, 2022: Price Lock. Touted as a win for customers, it promises customers will never see their bills increase. Sounds great if it wasn’t one of the ways they sweetened the pot to get their merger complete.

  • June 3, 2022: Assisted support and upgrade support cost jumps to $35. Ok, so your plan price may not change, but your admin fee has gone up and it now costs $35 for support? Seems like just another name for a fee.”

Verizon’s clap-back today is in response to an announcement yesterday from T-Mobile, which noted that AT&T recently hiked prices on some wireless plans by $6 to $12 per month. And Verizon announced an administrative fee increase.

Yesterday, T-Mobile said, “At the same time, Verizon is raising prices with a new made-up fee — the Economic Adjustment Charge — adding $1.35 per line. That extra charge will generate $100 million more per month for Verizon, which is $1.2 billion in just one year.”

Administrative fees

A decade or more ago, when the trend began of people disconnecting their wired telephone service, one thing made them especially happy: they no longer had to receive those 4-page monthly phone bills chock full of mysterious fees and charges.

But lately, the big three wireless providers have gotten back to implementing those types of charges.

A new blog from LightShed analysts Walter Piecyk and Joe Galone said administrative fees on wireless bills began around 2013 at about $0.60 per month per line.

The fees generate incremental post-paid service revenue that lifts average revenue per user (ARPU) for the wireless carriers.

“It’s a way to increase price without changing the advertised headline rate,” wrote the analysts. “In 2018 AT&T bumped their admin fee up by $1.23, generating $800 million of incremental recurring revenue overnight. Their competitors soon followed. In total, fees have risen to about $3.49 per post-paid phone line for each of the operators. Although for T-Mobile this only impacts a portion of its subscribers.”

LightShed estimates that admin fees generate from $8 billion to $9 billion of revenue per year among the three national operators.

But the analysts suggest maybe it’s time to just increase price.

“Higher rates cause churn and impact growth, or so they believe. In T-Mobile’s case it would raise extra scrutiny from regulators based on its promise not to raise rates for two years," wrote the analysts. “Perhaps these companies should reconsider.”

Customers aren’t stupid. They know if their phone bill has gone up.

AT&T CEO John Stankey addressed the pricing issue during a recent J.P. Morgan investor conference.

Stankey said, “The first play we ran, we wanted to make sure we did something in a transparent way for our consumers. There are other paths you can take to manage pricing. In this case we went directly at certain plans and went at plans in parts of the customer base we felt weren’t enjoying some of the best offers we have in the market.”

He said there will certainly be some churn. But AT&T is counting on many of these customers contacting the company, giving it an opportunity to upsell customers to better plans.

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