The Cable Conundrum: How will Incumbent Carriers in the US Compete with Cable Companies on Price in 2023?

Over the course of 2022, Verizon, T-Mobile and AT&T each offered a bevy of strong promotions on flagship devices in the US that kept subscriber additions high and churn relatively low. In 2022, AT&T and Verizon also increased service plan prices as the two carriers looked to offset the costs brought on by rising inflation.

But towards the end of 2022, the promotional game began to evolve. In addition to offering strong promotions on hardware, carriers started to discount their service plans as well.

  • T-Mobile adopted a promotion on service plans, offering four lines of unlimited data for $25/month each, along with four free iPhones.
  • Verizon came out with a similar promotion early in 2023, offering an unlimited starter plan for $25/month with that price guaranteed for three years.

In part, these subsidized service plans are a way for the carriers to win subscribers from one another. But these promotions are also an attempt to address the changing wireless landscape, where the cable companies are snagging subscribers from the incumbent carriers by offering service plans at much lower prices.

Pricing, Bundling and Flexibility at the Core of Spectrum and Xfinity’s Playbook

In Q4 2022, cable players Spectrum and Xfinity were able to pull in a combined 980,000 postpaid phone net additions, much more than those of Verizon, T-Mobile or AT&T. The low prices offered by the cable players are resonating with consumers and driving increased adoption. As it currently stands, T-Mobile charges $45 a month per line with two lines for its cheapest unlimited plan, while Verizon charges $55 a month per line for two lines of its cheapest unlimited plan. Meanwhile, the cable players are offering a line of unlimited for just $30/month to their internet subscribers. The deal is further sweetened with the bundling of multiple services and by adding more lines. This savings calculator allows consumers to calculate how much they can save by switching to Xfinity. Apart from savings, the core message also revolves around the cable player’s ‘no strings attached’ proposition. Consumers can change their plan month-to-month, which eliminates the fear of commitment and gives users the flexibility to switch. This helps consumers save money and adjust their plan according to their lifestyle in a way that cannot be done with incumbent carriers.

*From company websites

Cox To Intensify Wireless Competition

The success of Comcast and Charter with their Xfinity and Spectrum brands has established a model that other cable companies are fast taking up. Cox Communications announced the launch of their Cox Mobile brand at CES, while Mediacom recently filed for a trademark on the name ‘Mediacom Mobile’ in September 2022. While neither Cox or Mediacom has the scale that Comcast or Charter has, the cable players will only continue to siphon off subscribers from the carriers as the market expects more entrants, and potentially in larger numbers if the carriers do not adapt.

*From company financial statements

The cable companies have been offering superior flexibility and better prices, which means the carriers will need to adjust their approach by offering better value through their service plans. There are two non-mutually exclusive approaches that can be adopted – the carriers can either offer service plan promotions like those currently offered by T-Mobile and Verizon, or they can increase the value of their plans by keeping prices consistent but adding value to them with the inclusion of streaming service subscriptions and other perks that cable companies would lack the means or scale to match. Either way, the cost of service is likely to increase, which means the pot available for device subsidies is likely to shrink.

Hardware subsidies, service bundling and value-added services with premium unlimited plans have been key drivers for prepaid-to-postpaid migration so far. However, given the substantial economic headwinds that the carriers are likely to face in 2023, including the rising cost of debt, subsidized service plans could mean a shift away from device subsidies. Certain incumbent carriers have been dropping subtle hints on halting heavy device subsidies that have been ongoing for the past few years. This transition will be slow and gradual. In the meantime, carriers will shift towards offering promotions on their service plans to defend their territory, especially during points in the year when churn accelerates. That is part of why both T-Mobile and Verizon are offering limited-time promotional offers on service plans instead of making permanent price cuts to existing plans. However, the carriers will be hesitant to be too aggressive in offering low-price service plans because there is little appetite for a race to the bottom in terms of pricing.

As of now, there have been few serious changes in hardware promotions since T-Mobile and Verizon began offering service plan promotions, but the shifting landscape begs the question of how long the two major carriers will be able to keep their feet on both the service price and hardware promotion pedals. Eventually one will have to let up.