Model Behaviour

MVNOs shake up US market with new models and low pricing

Altice is a relative newcomer to the US telecommunications market, and new players are often the ones to stir things up for established players.

Netherlands-based Altice, which acquired US cable companies Suddenlink Communications and Cablevision in 2015 and 2016 respectively, has begun offering wireless voice and data services. It has worked with Sprint in an interesting two-way agreement, using the carrier’s network to offer services as a mobile virtual network operator (MVNO). In return, Sprint can use Altice’s fixed-line broadband infrastructure to densify its network.

This symbiotic relationship is enabling Altice to offer extremely — almost unbelievably — competitive post-paid wireless services. The company is offering unlimited mobile services for as low as $20 per month. And that’s a price that subscribers can now lock in for life.

But there are catches to this deal. To qualify for the $20 plan, customers must also be subscribers to one of Altice’s fixed-line services providers, Optimum or Suddenlink Communications. These two Altice-owned cable services combine to have about 5.5 million household customers, mostly in the New York City area and select markets in southern parts of the US. However, even people simply living in areas where services from Optimum or Suddenlink Communications are available can subscribe to Altice Mobile for $30 per month.

This pricing must be causing a feeling of consternation for the two largest wireless carriers in the US, Verizon and AT&T. These carriers enjoy an average revenue per user of about $50 for their post-paid phone subscribers. Even their most loyal customers must have their eye on a service that’s nearly half the price they currently pay.

Altice has the advantage of coming to market with an unconventional business model and a challenger mentality, tempting the millions of cable subscribers with unheard-of low pricing for post-paid mobile services. The two largest cable providers in the US, Comcast and Charter Communications, had already been wooing customers with their attractively-priced MVNO wireless services, successfully porting in subscribers from traditional wireless carriers.

In the US prepaid market, service providers have been developing incredible deals. The prepaid business has always been fiercely competitive, but the market is reaching new lows. T-Mobile, for example, has changed its strategy with its Metro prepaid sub-brand, no longer hiding the association between the two but rather boasting it with a new “Metro by T-Mobile” label and with low service prices and free smartphones.

The competitiveness in the prepaid market drove Verizon to create its own sub-brand called Visible. Aimed at younger users, Visible offers service on top of Verizon’s network. It started by providing unlimited voice and data plans for a flat monthly fee of $40, but has now introduced “party” packages, with two unlimited lines for $35 each, three for $30 each and four unlimited lines for $25 each.

US wireless carriers have managed to keep their average revenue per user among the highest in the world by giving generous discounts on devices and throwing in third-party content. They will continue to fight competitive pricing gravity with new services including 5G data. However, subscribers are being tempted with plans that promise peace of mind through very competitive pricing, and that’s bound to have a decaying effect on carriers.