Promises, Promises, Promises - Price Locks and the Cost of Predictability

Full Transcript

Don Kellogg 0m10s

Hello, and welcome to the two hundred and ninety fifth 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 Rod Trentner.

Roger Entner 0m21s

How are doing, Roger?

Guest Speaker 0m22s

I'm great. How are you?

Roger Entner 0m24s

I'm good. So I thought we could talk about a report that you've got coming out titled promises, promises, promises about price locks. Right?

Guest Speaker 0m33s

Yeah. You know, it's like every warning sign has a story hidden behind it. When you see, like, a sign that says don't treat a crocodile, you know somebody fed a crocodile and it didn't end well. Right? Right.

Guest Speaker 0m48s

And when you see price lock offers, that means somebody raised prices and it didn't go well. Right?

Roger Entner 0m54s

Yeah.

Guest Speaker 0m55s

Carriers raised prices, customers wanted predictability, carriers gave them price locks. That's literally 2526 in three sentences. And it's really, really interesting what happened here. Four of the five give price locks, the fifth AT&T gives you a guarantee without the lock. And so it's very interesting of how each of them went about it, and what it is, and what they lock and or not lock, and I can go through the different providers.

Guest Speaker 1m27s

And by the way, there's a research note coming out, and there's a report that goes into great detail about what actually is going on. And so Verizon, over the last, what, year, year and a half, churn has steadily gone up by like twenty, twenty five basis points. That's a lot, you know, when your churn was like point 9%, and then your churn is suddenly 1.1, 1.2%, that is a meaningful difference. Postpaid gross adds went somewhere in the 30,000,000 customer range to the 40,000,000 customer range. A little bit of that is because the cable guys we classify as postpaid, and they're heavily rating prepaid, but still, that number is, like, massive.

Guest Speaker 2m17s

And so Verizon has been in the past, at least the most prolific price raiser, they put down a three year guarantee, which locks the MRC, which is the monthly recurring charge, but it excludes carrier fees, auto pay discounts, plan per change, third party services, surcharges and taxes, right? And you need to be auto enrolled, and the whole counter resets when you change tiers. The lock holds the rate card, but the back end is, like, fully exposed, which is it is what it is. You know, T Mobile has a five year, you know, I I raised you. T Mobile always, like, beat and raised.

Guest Speaker 3m2s

Right. They beat and raised on the price lock too, you know, five year price lock on experience plans. The talk takes

Roger Entner 3m9s

But, I mean, is is it the trick here? They'll just come out with new plans. Right? And then those will have a price lock. Right, like you just when you wanna change prices, you just come out with a new plan.

Guest Speaker 3m17s

Well, yes and no. Carriers have literally thousands of active price plans.

Roger Entner 3m23s

Right.

Guest Speaker 3m23s

The base is largely inert, and so yes and no. Most people are paying their bill and they don't care. We see in our database bill rate plans from like twenty years ago.

Roger Entner 3m36s

Right.

Guest Speaker 3m37s

Literally.

Roger Entner 3m37s

Yeah.

Guest Speaker 3m38s

We build analytics for our base where we can track about 80% of the respondents to an actual rate plan. For 20%, I'm not able to do that because some of the plans are, like, really, really old, and I can't track back to like, there's some like, voice stream plans for like nine ninety five unlimited data or like nineteen ninety five unlimited data. Friend of the show, Avi Greencard is on one of them. And so we see this. But, yeah, they wanna push them to new plans, and by the way, what AT&T did there recently raising prices on the base was also designed to push them onto the new plans.

Roger Entner 4m23s

Right. I mean, you gate device subsidies, you gate upgrade offers, all that kind of stuff behind new plans. Right? Yeah. Or you just come out and give the folks on the old plans a $5 increase and push them off.

Roger Entner 4m35s

Right?

Guest Speaker 4m35s

Yeah. You know, it's a tax on the people who who are snoozing at the bill. But like the AT&T plan, it excludes the fees, plan add ons, for use charges, third party services like t satellite, if you pay for taxes, network management practices, you need me. And the taxes and fees are no longer in the rate plan, right? This is like that massive change that T Mobile did, where effectively they raised prices on their customers, on their new customers by like seven or 8%, which is the nationwide average number for taxes, but it's a little bit lower because taxes are only on the voice portion of the bill, but the fees are not.

Guest Speaker 5m22s

Charter actually has the tightest plan. They have the Spectrum Life Unlimited, which is a three year price lock, which locks the MRC in 48 states, which is really, really interesting. Everywhere they lock it but California and Texas, because they are they need to somehow taxes and fees need to be built separately. And the lock is only on the MRC side, but in the other states and the 48 states, this is a mind blowing thing. And it shows you how far cable has come.

Guest Speaker 5m55s

The Charter has actually the tightest lock. It actually locks the customer bill rather than just the rate card line. So you have to give Charter kudos for that. Comcast, very similar. Comcast, again, beat and raise, five year price guarantee.

Roger Entner 6m12s

Right. But the five year price is so much materially different from, like, the one or the two year price. Right? If you just wanna start paying more money and have that locked, then that's fine. Right?

Guest Speaker 6m22s

Yeah. No. But here's the thing. If you're tired of exploding prices and you and I have been very, very critical of exploding prices.

Roger Entner 6m32s

Oh, 100%. 100%.

Guest Speaker 6m33s

Here, you don't have exploding prices, and the reality is the introductory price is not the real price. Play silly games win stupid prizes. Both Comcast and Charter are getting away from that. Right. You know, you and I worked on the AT&T straightforward pricing plan when that came out, and it proves that straightforward pricing wins.

Roger Entner 6m56s

Yep.

Guest Speaker 6m56s

You know? And people rather pay a little bit more, but no. You're not playing stupid games.

Roger Entner 7m2s

Although I would I would say that that straightforward pricing that I've been on for my ISP has raised prices by, I believe, it's $5 over the last three years in a row.

Guest Speaker 7m11s

Each year? AT

Roger Entner 7m13s

Uh-huh. Straightforward pricing is absolutely a good thing. It makes it harder to kinda slip these things by consumers though. Right? Yeah.

Roger Entner 7m19s

Exactly. So So when you do need to raise prices, and then AT and and T's defense or the entire industry's defense, you know, the cost of labor and pretty much everything else in the world has gone up quite a bit during that time. Right? So if we're being rational about businesses being able to provide services over a longer term, if everything the cost of everything else goes up, then the cost of Internet and wireless service probably should go up too.

Guest Speaker 7m40s

Yeah. And we wanna point out that the price for mobile and Internet has gone up less

Roger Entner 7m46s

Absolutely.

Guest Speaker 7m47s

Than the general rate of inflation.

Roger Entner 7m48s

Absolutely.

Guest Speaker 7m49s

The cable guys have gone up a little bit more than the the fiber guys, but this is like a great thing for consumers. By the way, Comcast includes regulatory fees, franchise taxes, equipment rental fees, really, which is like, come on, guys. I don't think you pay fees for your equipment.

Roger Entner 8m11s

So the router and the modem is included, the extender and the mesh network is not. It depends, right, is the answer.

Guest Speaker 8m18s

Yeah. It depends. You know, with Verizon files, the router's included, and they upgrade my router every couple of years.

Roger Entner 8m25s

Which is important. Right? And and that makes a big difference too because I think a lot of the dissatisfaction we've seen across broadband providers has to do with an installed base of older equipment that may not necessarily be capable with new technology or even faster Wi Fi speeds, things of that nature. So to the extent that you want to keep customers happy, keeping them on the latest technologies are important.

Guest Speaker 8m46s

Yeah, exactly. And we see that very clearly in the satisfaction figures. The longer tenure of the cable customers, the unhappier they get, the more they pay, the more outages they have because it's

Roger Entner 8m58s

Well, yeah, more likely they're on old equipment that, you know, could be upgraded. Right?

Guest Speaker 9m2s

Yeah. And now memory is so expensive, upgrading routers will become really, really hard. And there might be even a shortage for new equipment for new customers. You know, if you want to change Internet providers, maybe now is a good time before they have shortages on memory. The interesting thing is that AT&T locks nothing, right?

Guest Speaker 9m24s

They have the guarantee, which is on one hand the most comprehensive protection plan. On the other hand, AT&T did not commit not raising prices. So it's a very, very interesting approach for each of them on how they have approached this. All of the carriers are doing the right thing. The question is, are they doing enough of it?

Roger Entner 9m48s

Well, I mean, the other question is, do you end up backing yourself into open corner, but four years down the road where, you know, you you functionally can't re rate your base without paying some type of remuneration? If you're T Mobile, you're paying for the last month of service.

Guest Speaker 10m1s

Well, everybody but Charter left themselves a door open to do this, right? By the way, the other thing that's really interesting is, and we talked about it, is AT&T One Connect. That's like the most T Mobile plan at AT&T. It's like five years ago, this would have been a T Mobile plan. Today it's an AT&T plan.

Guest Speaker 10m22s

That just tells you how the times have changed. When AT&T comes out with a plan where taxes and fees are baked in, right, on the heels of T Mobile abolishing the taxes and fees included.

Roger Entner 10m35s

Well, it's it's fighting T Mobile somewhere that I think is harder for them to go to. I mean, AT&T's fiber assets are so much more extensive than T Mobile's. They functionally can't FWA is a different animal. Right? So everybody can offer FWA pretty much everywhere now, but it's not a premium broadband connection in the same way that fiber is, both in terms of speed or reliability.

Guest Speaker 10m54s

Well, satellite, you can have now almost everywhere. I just looked it up.

Roger Entner 10m59s

You can take satellite. I'll take fiber.

Guest Speaker 11m1s

No. No. But yeah. No. I'm I'm in, you know, I'm in Suburban Boston, and I'm eligible for Starlink.

Roger Entner 11m8s

I like to use Internet indoors and where there are trees sometimes, but I get what you're saying. I think it should be an all of the above approach. Right? But what I'm saying is that T Mobile can't go where AT&T is now with kind of their fiber assets in the OneConnect plan, which I think is an important way of differentiating and competing. Right?

Guest Speaker 11m26s

Yeah. By the way, I might just buy some styling equipment and take the mobile stuff, but then it gets really expensive, because then I would have said I'll take it with me to Germany and test it in Germany, but my setup is not very good, and having a house in the Black Forest means you're in the forest with trees, and that is not very good for satellite coverage. So bummer. There goes my summer plan.

Roger Entner 11m51s

You should try it. Tell us how it goes.

Guest Speaker 11m53s

Yeah. No. I'm gonna look into it. Question is like, can I do it before I go to Europe or not, or after? Before Europe is like the counters and nuts.

Guest Speaker 12m3s

Anyway, I thought it was really, really interesting on what all of them are doing, trying to lower the prices, trying to atone for the sins of the past that they will continue to have to do because prices all around us are going up.

Roger Entner 12m19s

Right. Or in some cases, they could also just stop reporting light level churn. Right?

Guest Speaker 12m23s

Oh, yeah. They could do that too. Right? I think the Trump administration now lets them report only once every six months.

Roger Entner 12m30s

There you

Guest Speaker 12m30s

go. There

Roger Entner 12m31s

you go. Who needs accountability?

Guest Speaker 12m33s

Who knows who will who will take them up on that. Right? So let's report less less frequently, you know, and see how confident customers that will be a very, very interesting test, because whenever carriers report less, that's not a sign of confidence in the future. When carriers report more, that gives you confidence.

Roger Entner 12m55s

Absolutely.

Guest Speaker 12m56s

T Mobile that used to have, like, the most transparent, you know, information is now the least transparent. And at the heels of it, AT&T makes itself even more transparent. I'm a big fan of it, but, yeah, sign of the times. Sign of the times. You know?

Guest Speaker 13m13s

The end is coming.

Roger Entner 13m14s

So tell us tell us more about the report. Where can folks get it? When is it coming out? All that kind of stuff.

Guest Speaker 13m18s

Well, the research note should be out tonight reading and on our website today, so that's the freebie. And it should be on our website, you know, when you listen to this or at least Monday. Excellent. Fun read.

Roger Entner 13m29s

Well, it's definitely interesting. Definitely things are changing. Right? I think, you know, it's kind of a brave new world now. So as the industry kind of has reconfigured both the way they approach customer acquisition and the way they're reporting lack of customer acquisition or customers leaving, I think it's important for folks to wrap their head around that.

Roger Entner 13m47s

So it's definitely worth picking up.

Guest Speaker 13m49s

But the fascinating is, like, how different leadership teams are making different decisions. It's a little bit of flashback. Remember when it was, like when was it? 2000 when all the leadership all the CEO changed. We have almost the same situation here again.

Guest Speaker 14m3s

Mhmm. So it's absolutely fascinating how different executives are making decisions. We see the fingerprints and the handwriting all over the place.

Roger Entner 14m12s

All right, Roger. We'll talk to you next week.

Guest Speaker 14m15s

Talk to you next week.