Consumers have had their fill of expensive, contract-based phone plans.
Figures from T-Mobile USA on Thursday, added to earlier reports from other companies, indicate that the wireless industry lost subscribers from contract-based plans for the first time in the first quarter. Contract-based plans are the most lucrative ones for phone companies. The industry default over the past several decades, they account for the vast majority of revenue at the big phone companies.
The seven largest phone companies, representing more than 95 percent of the market, lost a combined 52,000 subscribers from contract-based plans in the January to March period, according to a tally by the Associated Press. The companies have a combined 220 million devices on such plans, accounting for about two-thirds of the total number of devices.
Since most adults, and many children and teenagers, have phones, there's little room for growth. But subscribers are also flowing to cheaper, no-contract plans, which showed an increase of at least 2 million. That figure is down from more than 5 million in the same quarter a year ago.
The industry is adding millions of non-phone devices, such as smart energy meters. These so-called "machine-to-machine" connections usually carry very low monthly fees, on the order of a few dollars per month.
For example, AT&T subscribers on contract-based plans pay an average of $64.46 per month, while other AT&T customers pay an average of $11.52 per month.
T-Mobile's report was issued on the last day of the industry's annual trade show in New Orleans. At the show, companies talked about ways of boosting business outside phones. For instance, AT&T started a home security and automation business, and the head of its wireless business, Ralph de la Vega, said the company is getting closer to offering family data plans, which would allow the sharing of one "bucket" of data among devices and family members. That could encourage people who have a smartphone to get a tablet with data service as well. Verizon Wireless has already announced that it is introducing such plans this summer.
The first quarter is a seasonally weak one for contract-based plans, and the industry is likely to show some subscriber additions for the whole of the year. But the gains will be spread unevenly over the phone companies. For the last year and half, the four nationwide phone companies have added or lost subscribers in order of size: Verizon Wireless, the largest, has gained the most, followed by AT&T Inc.
Sprint Nextel Corp., No. 3 in size, has mostly lost subscribers, while No. 4 T-Mobile has done so consistently. That poses a conundrum for regulators, who want to preserve vibrant competition in the industry.
