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April 21, 2011

AT&T and Verizon Wireless: Opposite Strategies to Win Landline Business

Both AT&T Wireless and Verizon Wireless (VZW) charge $19.99 (plus the usual extras) for unlimited US calling from residences. Both plans are clearly aimed at winning business away from the legacy landline carriers in those areas where the big dogs themselves are not the landline providers. Both services are competitive with VoIP offers from companies like Vonage, although slightly more expensive. However, the two giants have taken diametrically opposed approaches to both customer experience and use of their networks.

VZW, obviously confident in both the reach and capacity of the can-you-hear-me-now network, uses that wireless network to connect existing home phones for ingoing and outgoing calls (their offer is fully described here). AT&T insists that customers use their mobile phones but translates the signal to IP so that it is carried to and from their homes on the customers' existing broadband connections rather than relying on AT&T's less extensive and over-burdened wireless network (more on the AT&T offer here). In fact AT&T pitches the service as a way to improve cellular reception at home and only incidentally sells the extra-cost unlimited calling plan; saving money on phone calls is the whole thrust of the VZW marketing plan.

Both services will help to hasten the demise of small rural carriers whose landline business is already disappearing rapidly and will make it more difficult for VoIP only providers to succeed. AT&T will get more revenue from its existing customers by seizing the home-calling minutes but is depending on the willingness of customers to give up the home phone instruments. They will probably also stem defections from those who are frustrated by a poor signal in their own homes even though they may prefer AT&T at work. VZW, on the other hand, should gain new subscribers among those who still use their home phones extensively and may not even have broadband service. This is the only remaining demographic with low cellular penetration and is price sensitive but technophobic; those who still don't use cell phones will like being able to keep their home phones, although they will also be put off by the process of installing the VZW interface device.

From an industry PoV, VZW is increasing the use of its network and adding to the economic justification for each new tower and each new radio. The pricing of their voice offer makes it more affordable to use VZW for all the voice and data needs of even moderate data users who can hear them now; this proposition will get even better in terms of speed as VZW proceeds with its next generation LTE rollout. The AT&T plans seems like a way for them to defer the expense of network buildout and cedes ground to landline-based broadband providers.

Related posts:

Verizon Wireless Aims Salvo at Residential Landline Market

AT&T "Freeloading" on ISP Pipes

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