By all accounts, Verizon appears to have been forced kicking and screaming into offering its new unlimited data plans according to Craig Moffett of MoffettNathanson. By this line of thinking, theirs is but the latest shoe to drop in an ongoing wireless price war.
“Calling the current state of affairs in wireless a “price war,” however, isn’t quite accurate,” Moffett said. “A better characterization might be to call it a “capacity war.” And it just might be a war that Verizon can win. Whether by strategic intent or not, Verizon has seemingly found a path forward in what many have concluded is an irreparably commoditized wireless industry. Verizon is convinced that there is still room for network differentiation, and that offering full HD unlimited video will showcase not network deficiency, but instead will underscore its network advantage,” he said.
Their new unlimited plans come at a time when the consensus narrative is that Verizon’s network is spectrum constrained and is already nearing its capacity limits. But Verizon’s engineers are clearly confident in their network’s preparedness. “They do not appear to be betting on spectrum as the path to competitive advantage. Instead, they appear to be betting on small cells and network densification. It is here that they have begun to pull away from their competitors,” Moffett said.
Verizon’s competitors may struggle to keep pace. AT&T appears committed to a strategy based on content differentiation rather than network advantage. “They are already aggressively spending elsewhere to upgrade their aging wired network, and are understandably occupied with Time Warner and DirecTV. Meanwhile, Sprint remains cash-strapped,” Moffett said. “They have underspent on their network relative to peers, their cash flow remains negative, and they have continued to lose branded phone subscribers despite aggressive discounts. Perhaps only T-Mobile seems similarly committed to network-based competition.”
Tellingly, early returns suggest that customers are responding enthusiastically to Verizon’s new “unlimited AND best network” messaging according to Moffett.
“Necessity, as they say, is the mother of invention,” he said. “Verizon may well have landed on a strategy that will actually work. That’s certainly not what consensus seems to be thinking.”
March 8, 2017
Reader Interactions