very disruptive" pricing. Industry analysts panned the increased data for family plans as unlikely to help Sprint much because it wasn't a price cut and is $60 a month more expensive for existing Sprint customers than for new ones.
T-Mobile countered today with a promotion that encourages its customers to recruit their friends to switch to T-Mobile. If a Sprint, AT&T or Verizon customer comes to T-Mobile as a result of a customer's referral both the new and old customers get a year of unlimited data for free or a $10/month account credit if they are already on an unlimited plan.
Sprint responded to the T-Mobile referral promotion by announcing a new $60/month individual plan that includes unlimited talk, text and data for $60. This plan is $20 cheaper than T-Mobile's unlimited everything plan and is available to current customers who are out of contract.
I expect T-Mobile will respond to Sprint's $60 plan. It won't be that hard as Sprint's $60 plan is inferior to T-Mobile's in two respects. Sprint's plan, unlike T-Mobile's comes with a caveat buried in the fine print of the plan's promotional page, that says "Other plans may receive prioritized bandwidth availability." which I take it to mean that when the network gets congested $60 plan users data connections will be throttled or dropped. T-Mobile's $80 plan includes 5GB of hotspot use while. hotspot is extra on the Sprint plan at 2GB for $19.99 or 6GB for $49.99.
So far all the changes have been on postpaid plans. It would be nice to see lower prices and more data on prepaid too and I think we will, eventually. But the carriers would much rather add new postpaid customers because they are more profitable (the $60 Sprint plan is around $80 after taxes and fees in most states). Prepaid customers are also much more likely to leave when a better deal comes along. Even with no contracts, there's more lock-in with post paid because of installment phone plans.
Sooner or later prepaid prices will be drawn into the price war. Sprint's Claure has to prove himself and that means reversing Sprint's subscriber losses. T-Mobile is the fourth largest US mobile operator in number of subscribers and CEO John Leger has set a goal of passing Sprint into third place. Because prepaid customers are more willing to switch carriers and are more sensitive to pricing, cutting prepaid plan prices is an easy and easy way to gain customers. I think T-Mobile and Sprint will both try to lure prepaid customers with attractive new pricing starting before Black Friday. If AT&T and Verizon start seeing subscriber losses they will be drawn into the price wars too. How low will prices go? I wouldn't be surprised to see unlimited talk and text plans under $20/month with no data and under $30 with 500MB to 1GB of high speed data from the likes of T-Mobile's MetroPCS and GoSmart, Sprint's Boost and Virgin and AT&T's Cricket.
Price wars bring short term savings to customers but tend to have unpleasant side effects. To meet low price points, carriers will cut costs in areas like customer service staffing levels and by reducing dealer compensation, which could dry up the supply of deeply discounted airtime sold online. MVNOs will be badly hurt by a price war unless they can negotiate the lower wholesale pricing they need to match or beat cut-rate carrier plans. While I don't think there's much change of any of the carriers failing that's always a possibility and with less competition prices will rise.