What does T-Mobile’s new pricing plan mean for consumers and the wireless industry? A great deal. WRALTechWire asked business change expert Lawrence Lerner to offer his analysis about how T-Mobile has become a major change agent.
RESEARCH TRIANGLE PARK, N.C. – In a strategic move the American subsidiary of German based Deutsche Telekom AG is reverting back to becoming the medium and not the message.
T-Mobile is capitalizing on a trend already engulfing corporate America.
The company, in a decision announced last week, is removing subsidies for phones effectively creating a Bring Your Own Device (BYOD) model.
BYOD started with the Palm Pilot and exploded with the iPad and smartphones. As Consumer technology has become affordable it has directed the adoption the enterprise will take.
For T-Mobile, BYOD disrupts the existing subscription model and enables them to focus on network and content services to consumers. In the heavily competitive subscriber market, this creates first mover stickiness no one else can match. Subscribers will be able to purchase or bring their own phones to the nation’s fourth largest carrier.
European mobile carriers have done this for years where consumers hold phones for close to 60 months while in the US the norm is closer to 18 – 24 months until subsides are paid off. It’s at this time, mobile operators are most vulnerable to what the industry calls “churn.” Consumers leave a carrier for the latest technology or better plans. Churn can be as high as 35% which fuels higher customer acquisition costs to make up for lost revenue.
Fox Business “T-Mobile Removes Subsidies in Bid to Shake Up Wireless Market” speaks of better TCO (total cost of ownership) over other mobile carriers. However, consumer TCO misses the true opportunity. Once you are on a device with a reliable network, the investment in the phone, apps and the personal ecosystem consumers create is hard to move away from.
Apple’s iPad and iPhone are prime examples of a sticky ecosystem and on April 12th they are available through T-Mobile. According to Morillas brand loyal to the iPhone is about 88% and Android around 75%. In all likelihood, once you are on a device you will stay there.
If T-Mobile’s strategy is right, longer ownership leads to better margins and revenue. A device that is “yours” becomes more about personal style and customization. While the third party market for smartphones is hot (device caddies, Square) a world where you invest in a device and its add-ons is the next market bubble. I believe it will actually drive down device prices.
With low cost plans and more bandwidth you are then free to have many high-tech toys as you like. Savvy device manufacturers will create low cost devices that will sell like third party add-ons do today. I see a direct-to-consumer model becoming more common. The opportunity at the ultra-low end (under $50) becomes viable as well. Wireless and portable drives in the hundred-gigabyte range are a no brainer. Imagine streaming content on a single purpose 13-inch “dumb” screen for kiosks, signs and for the family road trip.
The current King of Social Media, Facebook has announced their own plans to release a Facebook enabled phone that is content rich and reinforces the notion that mobile carriers are simply infrastructure. In the end it all favors the consumer.
This is the first salvo in a complex and innovative war. Being prepared to do what your opponent is not has been a historical path to victory. T-Mobile must aggressively collect as many new subscribers in this model as possible. This builds a barrier to entry that is hard to challenge.
Editor’s note: Lawrence I. Lerner is president of LLBC, A Global Change Agent, and has a gift for communicating technology to business executives and business vision to technologists. Lawrence has a passion for corporate entrepreneurship and has created “game changing” services for the world’s top brands.