Friday, January 3, 2014

AT&T Struggles to Find It's Future in a World of Competition

I've been talking a lot lately about how AT&T's disastrous over reach in their failed bid to buy T-Mobile seriously damaged the company's long term prospects by creating a powerful competitor that can chew out profits from the low end of the market.

And clearly the top management at AT&T is starting to sweat, making a desperate bid to bribe T-Mobile customers to switch to AT&T.

T-Mobile CEO Laughs at AT&T's Desperation

It won't work and it's absolutely the wrong move for AT&T.  T-Mobile's customers are much more likely to be price sensitive, and long term thinking (since they made their reputation on no-contract deals).  Not many are going to rush to take a quick bribe from AT&T in order to get locked into higher overall rates, from a company known for horrible rates.  Also, where did all these new T-Mobile customers come from?  Mostly from people fleeing AT&T's lousy service and price gouging.  Not likely they're going to be fooled into coming back soon.

Now, in fairness, AT&T management probably knows it won't work, but they are simply trying to preempt T-Mobile's announcement of a similar deal to lure buyers away from AT&T.   Maybe if customers get confused, they'll just assume all the carriers are the same.  If T-Mobile offers incentives to switch, then AT&T will offer incentives.  If T-Mobile offers no-contract deals, then AT&T will offer no contract deals.  If T-Mobile offers unlimited data, then… opps!

Unlimited data?  AT&T was supposed to have won that battle long ago.  After all, hadn't they patiently explained over and over that it was impossible to have unlimited data plans?  Didn't they pay tons of tech bloggers to say that tiered data was inevitable?  That is was un-American to even consider that you shouldn't have to pay per bit?  Remember all those evil data hogs that were ruining it for everyone?

Of course, it was all bullshit and part of AT&T's grand plan to double dip on phone service by charging everyone per bit, and then getting businesses to pay an extra fee to directly to AT&T to not charge customers for those bits.  It was the kind of plan that could only work if AT&T had a monopoly (or close to with collusion from Verizon).  But Sprint didn't bite and now it and T-Mobile steal customers away by the millions offering "unlimited" data.

AT&T's latest announcement shows that's its making so much money per customer it can offer a $450 bribe just to try to lock them into to their uncompetitive rates.  So how long before AT&T has to bite the bullet and offer unlimited data again?  Not long, I would guess.

AT&T cannot win chasing after T-Mobile in a race to the bottom.  They need to shift gears quickly while they still have much larger market share and can at least claim to have better coverage.  So here's a five point plan to save AT&T:

1. Get rid of tiered data.  Customers hate it.  Fine, you can offer a 5gb plan as "Unlimited," and have some pricing for tiers over that, but stop trying to force people into ridiculous 300MB plans to further your impossible dreams of double dipping.  It won't work.  Offer one simple plan, preferably with a throttled cap after 5gb, and then a high data plan for high use customers with no throttle.  Keep it simple.  That's what customers want.  And then they will be willing to play a little more for AT&T coverage.

2. Embrace the iPhone.  Stop trying to talk customers into crappy Android and other low end phones. You just make enemies of one of the best customer bases: Apple fans.

3. Embrace subsidies.  Rather than lecture customers that subsidies need to go away, AT&T should offer the best ones.  That is, after all, how it built its smart phone base to begin with.  Much better to offer the iPhone 5S for free, rather than $199, then try to bribe a low rent T-Mobile customers with $450 to switch.  Offer something that T-Mobile won't match.  Highly subsidized iPhones.  Then go ahead and lock people into long term plans at higher rates, but at least they got something they want upfront.  Do it all one better by promising a $99 upgrade to the latest iPhone anytime they are released in the future.  That would bring in the customers and still probably cost less that $450.

4. Embrace the iPad and iPad mini.  Early on AT&T dismissed the iPad.  Huge mistake.  It costs extra for people to buy a cell connected iPad.  AT&T should give them every incentive to do it.  Anyone with AT&T phone service should get a free 500mb monthly for their AT&T connected iPad.  And a huge discount on 5gb and beyond.  The carriers are crazy not chasing after this market.  Rather than encouraging people to use wifi on their iPads by making it too expensive, they should get them used to the idea that cell service is more convenient.  Even if eventually they raise prices on it.  (I don't expect AT&T to give up evil completely.)

5. Put an emphasis on premium service.  AT&T service sucks.  Rather than chase after the low end of the market, they need to make it clear they charge a little more, but offer better service.  This will be hard, but it's absolutely necessary.  At minimum, their marketing needs to emphasize better service to justify their higher prices.  They can't fool anyone into thinking their the cheapest carrier anymore. And they shouldn't want to be the cheapest carrier.  They should act like a premium service.

If none of this works they can always switch gears and race for the bottom.  But if they don't try this first, they won't have the option later.  If it works, being the premium service is much better in the long run.

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