What do unlimited calling plans really offer businesses?

How to know if unlimited calling is right for you
  • Brad Reed (Network World)
  • 22 February, 2008 11:44

Verizon's announcement last week that it was launching a flat-rate wireless plan that would allow for unlimited calling had a cascading effect on the US telecom industry, as AT&T and T-Mobile soon followed suit with flat-rate wireless calling plans of their own.

In the wake of these new plans, some analysts have speculated that carriers have started offering them to attract new business customers. With more businesses requiring more mobility from their employees, they note, adopting an unlimited calling plan might be a good way to meet their workers' needs without having to worry about overage or roaming charges.

"If you think about people in the transportation business or people who do business nationwide, it makes a lot of sense for them in terms of simplifying their payment structure," says Dan Shey of ABI Research, who also thinks that carriers will try to use flat-rate plans to wean business customers off of their traditional landline services. "If carriers can provide voice calling and messaging all in one, then that has benefits of mobility. And if it's reasonable from a cost perspective, it's going to have impact on the landline business."

Of course, flat-rate plans won't be right for every business. All three of the carriers' flat-rate plans start at US$99.99 per month per user, with additional rates charged for various levels of text message, e-mail and Internet usage. Gartner analyst Tole Hart estimates that the current flat rates will only be attractive to high-end users who use more than 2,000 minutes of wireless services per month.

Similarly, telecom analyst Jeff Kagan says the decision to switch over to a flat-rate plan may simply hinge on whether a customer spends more or less than US$100 a month per user on wireless telecom expenses. Obviously, Kagan notes, it makes all the sense in the world for a business that spends US$150 monthly per user to get a flat-rate plan, while a business that spends US$60 monthly per user would be better off sticking with its current plan.

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However, it's possible that competitive pricing could drive down flat-rate wireless plan prices in the long run and thus make them more palatable for businesses. After all, the companies' flat-rate wireless announcements came little more than a week after Sprint CEO Dan Hesse told USA Today that his company was looking at offering its own national unlimited calling plan as a way to set Sprint apart from its competitors. If Sprint still wanted to make a splash in the market, Kagan says, it could come out with its own flat-rate plan that charges US$10 less per month than those of its competitors.

Andrew Seybold, a wireless industry analyst and the founder of Andrew Seybold, is similarly confident that flat-rate plans are certain to come down in price as more carriers start competing for customers' services.

"I think Verizon started the unlimited voice pricing high enough that it has room to move it lower in response to the pricing war this is certain to set off," he says. "What we are seeing is the beginning of the flip-flopping of fixed-rate services from data to voice and the pay-for-use model being deployed in the data world. This makes a lot of sense to me since data uses a lot more bandwidth than voice and bandwidth is shared, which means there is a finite amount per cell sector."

Another reason to expect flat-rate price plans to fall is that carriers have invested quite a bit in upgrading their networks' capacity, thus making it less expensive to send calls through wireless networks. Verizon Wireless, for instance, says that it has invested nearly US$44 billion since it was formed to upgrade and enhance its wireless network to provide more capacity for voice and other services. Additionally, data recently released by the US Federal Communications Commission () shows that the price of wireless minutes has dropped steadily throughout the past decade, as the average US mobile subscriber paid US7 cents per minute in 2006, down from an average of US11 cents per minute in 2002. In 1994, the average price for mobile voice calls stood at US47 cents per minute, the FCC says.

But potential cost savings are only part of the appeal of flat-rate plans for businesses. Businesses that are constantly monitoring their employees' usage of their wireless services might be willing to pay a little extra money per month to simplify their expenses and eliminate the headaches involved in keeping track of minutes used. Noting that a majority of companies don't have a defined strategy for managing their mobile telecom expenses, Nemertes Research analyst Irwin Lazar says that this level of predictability could make flat-rate plans a major trend within the industry in the coming years.

"Looking at how quickly AT&T and T-Mobile reacted to the Verizon announcement, I think it was a good indication that we finally may be nearing the end of the per-minutes cell service," he says.