Wireless carriers are going head-to-head in what is turning out to be a pricing war. The two largest U.S. carriers -- AT&T and Verizon Wireless -- have cut subscription prices this week.
The first price reduction came from the biggest carrier, Verizon, as the New Jersey-based company cut prices for some of its plans. Beginning Monday, customers could sign up for an unlimited plan that allows calls anywhere in the U.S. for $70 a month, down from $100, or an unlimited talk and text plan for $90 a month, down from $120. Verizon also slashed prices for its family plans, making unlimited talk $120, down from $200, and unlimited talk and text $150, down from $230.
Verizon's 89 million existing customers are not impacted by the changes unless they want to switch. They can make the change without being penalized or having to extend their contracts.
Just after Verizon announced the cuts last week, number-two AT&T with 82 million U.S. customers announced cuts for similar plans, also effective Monday. Instead of smartphone users, including iPhone users, paying $130 a month for AT&T's unlimited voice and data plan, they will now pay $100. Existing users who make the switch won't have to pay any fees or extend their contracts.
"We have twice the number of smartphone customers as our nearest competitor, and our new plans reflect customers' continuing desire to do more with their phones -- including talking and browsing the web at the same time," said Jenny Bridges, an AT&T spokesperson. "In addition, the new plans we're offering make it even more attractive for customers to choose AT&T."
The pricing war between the two giants comes a year after smaller wireless carriers, including Deutsche Telekom's T-Mobile USA and Sprint Nextel's Boost Mobile, announced lower-cost plans. T-Mobile offers unlimited voice, text and data for $100 a month or $80 without a subsidy, while Sprint offers unlimited voice, text, data and MMS for $70 a month with limited landline calls.
"For AT&T and Verizon Wireless to lower price plans around the same time comes as no surprise," said Richard Murphy, IDC's mobile analyst. "They are competing head-to-head with each other for subscribers and revenue."
More To Come
Murphy expects the back and forth to continue as competition from other rivals, including MetroPC, Leap Wireless, and Revol Wireless, heats up.
"If one rolls out a new pricing option for consumers, the other will have to react," Murphy said. "They are both going after the same customer: The postpaid subscriber who is interested in strong service and a great phone."
At the core of the pricing war between the wireless carriers is the smartphone market competition, analysts say. Manufacturers, including Research In Motion, Nokia, Palm and Apple, are all vying for the best deal with carriers like Verizon and AT&T.
Mike Kent also contributed to this story.