AT&T, Verizon, T-Mobile Could Face Disruption From Unlikely Competitors - Smaller Mobile Providers Reselling Their Service At Huge Discount

• A handful of upstart wireless providers like MobileX and DISH Network Corp's (NASDAQ: DISH) Boost Infinite failed to gain traction despite offering monthly service plans at less than half the average cost of the major national networks.

• Each of these challengers is reselling service provided by one of the big three carriers AT&T Inc (NYSE: T), Verizon Communications Inc (NYSE: VZ), or T-Mobile US Inc (NASDAQ: TMUS) through wholesale agreements known as mobile virtual network operators or MVNOs, Bloomberg reports.

• Aside from the network payments, the MVNOs have limited overhead, conduct business primarily online, and generally do not subsidize new phones, unlike the more prominent companies.

• The group plan of the more prominent players like AT&T helped to contain the churn rates or pace of mobile phone subscribers switching services despite inflation-related fee increases and price hikes last year.

• The higher prices and attractions to get customers to upgrade to higher tier plans have helped boost the size of the average phone bill over the past three years.

• The popularity of Netflix Inc (NASDAQ: NFLX) and Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) YouTube streaming proved instrumental to the spike in data consumption with the launch of unlimited data plans.

• As unlimited data plans gained traction, bills became more predictable as overage charges disappeared.

• "Customers don't like those surprises," said Lisa Pierce, an analyst with market researcher Gartner Inc. Unlimited plans "removed a good amount of anxiety." "If the job market softens, people will start looking at their wireless bills," Pierce said.

• Consumers have been lulled into expensive plans with unlimited data, free phones, and complementary streaming services, says MobileX founder and CEO Peter Adderton. Big carriers "charge you extra, so you don't have to worry if you run over. That's a business model waiting for disruption," Adderton said.

• Photo via Wikimedia Commons

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