The interesting thing about the U.S. wireless market is that there are a lot of holdover elements from the previous telecommunication model. I am, of course, talking about landlines. With landline marketing, it is all about access and territorial control. A lot of this mindset has carried over to wireless telecommunications. Prices are artificially high, especially in the data end of the equation.
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Thankfully, there are market forces in motion that players like AT&T (NYSE:T) are quickly responding to. By reducing its prices on shared data plans, AT&T is finally waking market players up to reality. The reality is that the U.S. wireless market is a completely different beast from, the older model that they are often consciously or unconsciously referring to, landline communications.
In the wireless market, the name of the game is all about capacity and market share. By focusing on market share instead of other market metrics, AT&T is paving the way for greater profitability in the future. This is more in tune with the nature of wireless consumption and scales better with this form of communications technology Its recent earnings report confirms the wisdom of this strategy. AT&T’s sales are improving due to this volume-based approach. I suspect that, as other telecom players suffer losses due to their current business models, the wireless market will eventually gravitate towards a commodity access model. Expect prices to sink further as this new business model expands and becomes standard throughout the industry. Lower prices will eventually turn wireless into a commodity with a broad enough consumer base that it will still be profitable for operators with the right scale.