The move by Verizon is likely to cause the one thing that wireless providers have hoped to avoid–price wars. The Verizon unlimited data plan is meant to pull customers from AT&T. AT&T will certainly match the Verizon wireless plan and may decide to offer a program which is even more competitive.
The number of wireless subscriber in the US is about 300 million, which means it is near saturation levels. The four major providers–T-Mobile, Sprint-Nextel (NYSE: S), Verizon Wireless, and AT&T — fight for market share. The industry has hoped that consumer would pay high rates for the ability to transfer video and data files. It turns out that the opposite may be true. The carriers have begun to turn to price as a means to attract customers.
The need to offer more services to subscribers for less money would particularly hurt the fortunes of AT&T and Verizon which have lost a great deal of their previously profitable landline business. A sharp drop in margins in their healthy wireless business would damage their fortunes permanently.
Douglas A. McIntyre
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