The New iPhone Has Carriers Hustling for CustomersBy
The new iPhones are almost here, and your wireless carrier is feeling excited and insecure. Carriers began maneuvering for position as soon as Apple announced its new devices. Their intensity reflects a new reality in the wireless industry: There are fewer tricks to keep customers locked into their networks, inspiring companies to compete in new ways.
On Wednesday, T-Mobile announced it would expand Wi-Fi calling to the new iPhone. It isn’t new, but T-Mobile is the only carrier that will let people make calls over Wi-Fi on Apple’s new phones. The company also says it will allow anyone to trade in phones for a Wi-Fi-enabled device, so long as they join the company’s $10-a-month upgrade program. Now T-Mobile will be able to claim that it provides service in places no one else can, while also plugging holes where its network isn’t as strong as the competition’s.
This may not be persuasive—and if it isn’t, it will partially be T-Mobile’s own doing. The major carriers today don’t compete much on network quality, because with the exception of Sprint, they’re all basically good enough. Now they compete on price, a trend T-Mobile started last year. At the time, it needed a way to lure people from AT&T and Verizon Wireless, whose networks had better reputations. It has been far and away the most successful at adding customers in the time since, inspiring the entire industry to shift away from subsidized phones with two-year commitments.
Which brings us to this fall. The release of a new iPhone has always prompted a disproportionate number of customers to reassess their relationship with their wireless carriers, and this month’s release is the first since T-Mobile started offering to reimburse the early-termination fees customers have to pay to get out of their existing contracts. The result is a watershed moment, according to industry analyst Craig Moffett. People want new iPhones at low prices, and they’re more empowered than ever to change carriers to get the best deal. “We’re going to see the first test of loyalty to carriers vs. loyalty to Apple, and Apple is going to win that war,” he says.
In a role reversal, T-Mobile’s competition is focusing on price. Verizon said on Tuesday it is offering a free iPhone 6 to anyone willing to sign a two-year contract and hand over an old phone. On the same day, Sprint began offering a plan called “iPhone for Life,” where customers can get a new iPhone every two years with no initial payment.
This isn’t great news for the carriers, whose profit margins will get tighter. People looking to upgrade their phones, on the other hand, are likely to have better deals to choose from.