Sprint Bucks Tiered-Pricing Paradigm

DanHesse

Sprint and AT&T this week underscored their differing strategies on mobile data pricing, with Sprint sticking to offering an unlimited plan even as AT&T, Verizon Wireless and T-Mobile have switched to tiered-pricing based on usage.

Sprint has maintained that approach with its next-generation WiMax network, charging $60 a month for unlimited 4G service (though 3G plans still have a monthly 5GB cap). Verizon this month introduced tiered pricing with the initial rollout of its LTE 4G network and Sprint will certainly follow suit when it launches its own 4G network in the coming year.

Speaking at the All Things D: Dive Into Mobile conference this week, Sprint CEO Dan Hesse said the company for now will continue to buck the current trend toward usage-based pricing. "Customers will pay a premium for simplicity. Even if it's not in their best economic interest, they will go with the unlimited plan," he told The Wall Street Journal's tech columnist Walt Mossberg.

Hesse also suggested Sprint is considering offering one plan covering multiple devices--smartphone, tablet, laptop--connected to its network. "That's the next step to simplicity," he said. (Sprint is also planning to launch a 4G tablet in 2011.) For its part, AT&T seem happy with less simplicity.

At a separate conference, AT&T CFO Rick Linder said the company's switch to a tiered-pricing plan for mobile broadband six months ago has been a success. He explained the vast majority of the 7 million subscribers on tiered plans have chosen the costlier 2 GB option for $25 a month. He added that the move has been a plus for both subscribers and the company, and that AT&T hasn't seen a significant drop in average revenue per user (ARPU) as a result.

From the customer standpoint, the adoption of tiered pricing certainly didn't help AT&T in the latest Consumer Reports rating of cell phone service released this week. The carrier finished last in the consumer watchdog's annual customer satisfaction survey of mobile users. By contrast, CR noted Sprint pulled even in overall satisfaction with Verizon, which has been the top provider in its ratings for most years since 2003.

A recent survey by investment research firm Sanford C. Bernstein found most consumers weren't happy with the idea of usage-based pricing and that the vast majority prefer unlimited plans. As part of its consumer empowerment initiative, the FCC has also made a push to eliminate so-called bill shock and "mystery fees" arising from confusing or deceptive carrier practices.

FCC Chairman Julius Genachowski has pointed out that unlike tracking cell phone minutes, "Most people still don't know what a megabyte is."

With AT&T expected to lose its exclusive deal for the iPhone next year, you might expect the company to be looking for ways to woo customers by maintaining an unlimited voice and data package beyond the term of existing customer contracts. But it doesn't sound like that step is in AT&T plans. If Sprint were to eventually get the iPhone, its unlimited plan could prove an advantage. Asked about that possiblity this week, Hesse said he'd like to have the iPhone. "It's a wonderful phone," he said.

Tags: mobile
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