Monday, August 22, 2011

Buffets and Texting

            With AT&T’s elimination of moderate texting options, e.g., 1000 a month for $10, one either pays an extortionate 20 cents a text, or joins the buffet crowd with all you can eat pricing of $20 a month, $30 for up to five lines.  So in the U.S. the same wireless carrier offers one of the world’s highest texting rates at the very same time at it offers “best in class” pricing.  It depends on subscribers’ appetites and whether they add a texting “rate plan.”

            The AT&T “streamlining” of text plans forces subscribers to make a decision that AT&T predicts will generate more revenues.  In light of the fact that texting generates little if any incremental costs, AT&T can accommodate even more texting before congestion occurs.  But just like athletic club memberships, all you can texting eventually means most subscribers—to the exclusion of teenagers—taper down their consumption over time.   Just how many months can one text 2000 times or more?  For anyone who failed to reach 1000 a month, they now have to meet or exceed 2000 to capture the same utility as the price point will increase to $20 a month.

            Clever AT&T, but does this carrier’s management want to show pricing power at the same time it vigorously claims how competitive the market operates?  And just how long will it take Verizon to increase its texting rates?