AT&T’s OneConnect Plan

Full Transcript

Don Kellogg 0m10s

Hello, and welcome to the two hundred and ninetieth episode of The Week with Roger, a conversation between analysts about all things telecom, media, and technology by Recon Analytics. I'm Don Kellogg, and with me as always is Roger Entner. How are doing, Roger?

Roger Entner 0m23s

I'm great. How are you?

Don Kellogg 0m24s

I'm good. So thought we could talk about some new plans that are out in the market today or coming out soon. AT&T has a new OneConnect plan. Do you wanna talk through that?

Roger Entner 0m35s

Sure. This is, how should I say, a hallmark AT&T DNA level kind of plan of driving convergence. So it comes right now in three flavors. For individuals, it's one line, of course individuals, four total lines, which means you can add to this three devices, whatever you want, a watch, a tablet, another tablet, whatever, up to a gig of fiber, and it's $90. Then it has Duo, a $120, two voice lines, eight total lines against with fiber.

Roger Entner 1m15s

And then family, $225, up to 10 voice lines, up to 20 total lines, and up to gig of fiber. I look at fiber, this is like the Duggar family plan, right? You know, or the I'm

Don Kellogg 1m30s

not sure you would wanna brand it the Duggar family plan.

Roger Entner 1m33s

Probably not. With the news that's currently in the thing, it's like probably not. Yeah. But this is for like large families. When I look at this, a, it's only for new customers inside the fiber footprint.

Roger Entner 1m45s

This is a start. When I look at this, this has like the John Stankey pattern printed on this in big JTS font. It is a convergence play built on fiber. The next logical step for this is to bring this to existing customers, to bring it in line with the AT&T guarantee that's available for everybody. And then the next one would be a greater leap, in my opinion, I don't know if they will make the leap or not, is to bring this also then make it FWA.

Roger Entner 2m18s

This attacks cable head on. This is designed to be a cable killer, basically.

Don Kellogg 2m24s

Right. I mean, the price point you're getting down to where cable gets with broadband plus free wireless lines. Yeah. Nothing is getting called free here, but the out the door price is very competitive with those cable plans that honestly have been driving cable gross ads in the industry for the last four years. Right?

Roger Entner 2m42s

Yeah. Massively. It's a very, very attractive offer. And it has taxes and fees included. So they took the fiber playbook of including taxes and fees into this and bolded on the mobile connection.

Roger Entner 2m58s

But the thought pattern is very clearly coming from a fiber centric, straightforward pricing playbook that worked really, really well for AT&T. And so from that, it makes it really interesting. Logically, then when we look at the plan, the jump between two lines and 10 lines is large. Something needs to be in between.

Don Kellogg 3m21s

Unless you're the Duggars, right?

Roger Entner 3m22s

Unless you're the Duggars or you're a big loving Mormon family or Elon Musk. Right? Elon Musk. The family plan is the Elon Musk plan.

Don Kellogg 3m33s

Well, I mean, if you get up to 10 lines, then it's a flat rate. Right?

Roger Entner 3m36s

Yeah. Exactly. Do you say

Don Kellogg 3m38s

Could you just give four lines to your closest friends?

Roger Entner 3m41s

You could. Right? And up to 20 total lines. You can make this your totally connected devices thing. You just load up devices.

Roger Entner 3m51s

I like the logic of like, you have a communication need, we'll take care of it. Don't worry about it. One price, everything included, it's neat.

Don Kellogg 4m0s

Well, it's further confirmation that nobody cares about ARPU anymore either. Right? Because This is the ARPA. Right. Exactly.

Don Kellogg 4m7s

Exactly. So if you were counting on getting measured by ARPU, you wouldn't do this. Right? Because it's gonna drop the ARPU through the floor if somebody gets, you know, three smartwatches and two hotspots and, you know, everything else.

Roger Entner 4m18s

And so the foregone conclusion is that AT&T will also stop reporting ARPU in the in the near future. Right?

Don Kellogg 4m25s

I would imagine so. Yeah. I mean, why bother. Right?

Roger Entner 4m28s

Yeah, exactly. Also, the Duo tier hits directly also T Mobile. This is also targeted then here at them, inside the AT&T Fiber footprint. That is obvious. And so it's very, very interesting on how this was constructed and how it's executed.

Roger Entner 4m48s

But, yeah, it's how it will play out.

Don Kellogg 4m49s

Yeah. I think it's a really appealing plan. You know, I've I've been an AT&T Fiber customer for years, and it's always been great service. I have it bundled. I might reconsider that as a consequence of this.

Roger Entner 5m1s

Oh,

Don Kellogg 5m1s

wow. Because it is a really fantastic deal. You know, I've got two kids. They're gonna get phones here pretty soon. It starts to add up when you've got the, you know, line edition fees and everything else, particularly given that T Mobile is not doing as many free lines as they used to do.

Don Kellogg 5m15s

This is almost like AT&T's version of free lines, right, on some level?

Roger Entner 5m19s

On some level, absolutely. Especially on the family thing. And talking about prices going up, AT&T also increased prices on their base. Depending on the plan that you have, it is going up $5.10, or $20 a month. They give you 20 gigs of hotspot data with it.

Roger Entner 5m42s

So it's not like money for nothing. All of these plans are becoming richer. But it's, on one hand, clearly a drive to get people onto the new plans. Right. And for the inert masses, it cost them more money until they check their bill and they're like, oh, right?

Roger Entner 6m0s

And as I mentioned on Twitter, I tried to call in when that happened, and it was like an hour and a half wait time. Or they would call you back somewhere between an hour and nine minutes and an hour and forty three minutes. So clearly, the call center capabilities or capacity and the demand was not in line, at least that day.

Don Kellogg 6m20s

If you're in the fiber footprint, it's kind of a carrot and a stick approach. Right? Like, I think the new plans are very, very good, very, very rich, particularly if you've got, like, a multiline setup. But if you're outside of that fiber footprint, then, you know, we we've done some research on, you know, how much you can reasonably raise prices and not have to deal with some blowback, and this exceeds that. Right?

Roger Entner 6m40s

Yes.

Don Kellogg 6m40s

It'll be interesting to see AT&T has had really good churn, like historic churn up until recently, so it'll be interesting to see.

Roger Entner 6m48s

Well, this will drive churn without a doubt. Right. You know, we can put somewhere a marker of we had great churn. You know?

Don Kellogg 6m57s

Yeah. But I mean, as you as you said earlier this morning, executives are not compensated on churn. They're compensated on

Roger Entner 7m3s

Revenue. Revenue. And so this is revenue and profitability. It falls straight down. This tells me that AT&T management needed to close a gap in revenue and or EBITDA that they needed to close, and this is their way to close it.

Roger Entner 7m22s

That's the other implication here. You don't do this because you get up in the morning and feel like, hey, today I'm gonna raise prices on my customers. There's a need for that.

Don Kellogg 7m31s

Well, I mean, the other thing I would say is that the new plans are a long term play because we know bundling does reduce churn. Or churn for bundled customers is lower. Right? I know you always say happy people bundle. Bundling doesn't make people happy, but low prices do a lot of times.

Don Kellogg 7m45s

So this is a long term play, but it's gonna cause some short term pain on the churn front. So it'll be interesting to watch.

Roger Entner 7m52s

Yep. And if anything, AT&T is looking at the long term plan. That's one of their strengths. When you look at the best prices, best plans, devices for everyone, they have been remarkably consistent on this. And this is now the first plan innovation that they had in

Don Kellogg 8m12s

Three or four years, right?

Roger Entner 8m13s

Since John Stankey became CEO. Yeah. And I thought it had paid them great benefits by keeping, you know, the ship steady and not changing price plans all the time as they did, and everybody else did quite frequently. And so this is a meaningful change.

Don Kellogg 8m31s

Yeah. It'll be interesting to see how it plays out.

Roger Entner 8m34s

Yeah.

Don Kellogg 8m35s

Alright. We'll talk next week.

Roger Entner 8m36s

Talk to you next week.