Thursday, February 28, 2008

Sprint's $99.00 Cell Phone Plan Trumps AT&T, Verizon & T-Mobile

Sprint's $99.00 Cell Phone Plan Trumps AT&T, Verizon & T-Mobile and ushers in a new era of competition that is destined to reshape personal communication and be huge win for consumers. The average cell phone bill in the U.S. is $55.00. The average home phone bill, with unlimited long distance is about $35.00. It won't take people long to figure out that for $9.00 extra a month, they can have their cake and eat it too!

Those wagering against Sprint's success need to place their bets carefully. Unlike AT&T and Verizon, who have a significant terrestrial (land line) businesses, Sprint has no such liabilities. If AT&T and Verizon decide to continue the price war, they will wind up further cannibalizing their own land line business. All this at a time when they are investing heavily to build out their networks with fiber to compete with the Comcast and other cable companies.

T-Mobile's HotSpot@Home Talk Forever offering is another potential loser in the unlimited use price war. Even with their new $9.99 p/month price point, the limited number of phones and WiFi hotspots that support this service, make it available to only a small minority of cell phone users.

Although it will take some time for us to see the true impact of this "war" on the major cell service providers, including Sprint, the negative fallout for Helio could be much quicker. Helio has based its "success" on providing unlimited data and optional unlimited voice services, delivered via Sprint's network and bundled with unique, high-end devices that are optimized for data (chat/web) functions. They are now faced with the uphill battle of convincing potential customers that their uber-phones make it worth dealing with a boutique vendor, while seeing the margins that subsidize that hardware drop to razr (pun intended) thin levels.

As attractive as the new pricing is, Sprint's new chief executive, Daniel Hesse, still has his work cut out for him. The Nextel merger has been a disaster and due to a hemorrhaging of Sprint/Nextel customers, the company's stock price and balance sheet is in the toilet.

To succeed/survive, Sprint needs to give up on Nextel and focus all their energy into transforming their retailer base into Value Added Resellers (VARs). As long as they continue to sell only the commodity of the connection and subsidized phones, they will have little to differentiate them in the market.

A VAR approach to the market would focus on positioning their new unlimited plan as a home/SMB phone replacement. A great solution to make this possible is the XLink home phone gateway. This device allows you to use your home phone handset(s) with your cell phone's service, to take and make calls using your cell phone number. The VAR strategy also means selling software and training.

Their are literally thousands of software programs for the Palm, Windows Mobile, Blackberry and Web 2.0 platforms like LinkedIn, Facebook, etc, from games and diet management programs to sophisticated medical information applications. Every software program sold to a PDA or smartphone user has the potential to add $5.00 - $150 to the bottom line and unlike cases & chargers, be a recurring source of revenue. Technical training, a $48.7 Billion market, is another potential high profit area. Teaching companies or even individual customers how to use the latest generation of PDAs and smartphones with always-on data services for calendaring, scheduling, project management or even remote access could be a highly lucrative business.

It will be interesting to see how the new unlimited "price war" progresses. One thing is almost certain, the consumer is going to be the ultimate winner!