The Rise of T-Mobile
We all know T-Mobile has evolved from a 2G only terrible network to a formidable network with fast speeds and decent coverage in the metropolitan areas.
I’m impressed with how they pulled it off. They plummeted their fees and took on there humble policy of: “We’ll buy your business. We’ll give you a stupidly good deal. We’ll make it a safe decision.” So smart.
But most people (like my wife) stayed with T-Mobile either because of the price, the flexibility, or other features.
T-Moblie grew in customers and revenues mushroomed. And Verizon and AT&T fought the “race to the bottom” they forgot to maintain value. So the Verizon network has gotten slower and slower and worse and worse. Verizon and AT&T both sold off most of their towers because, well, why do you need control over your product? (Verizon smartly invested ALL of the money they got from selling their towers to acquire AOL—yes THAT AOL.)
T-Mobile went to the companies that bought the Verizon and AT&T towers and did a deal to install antennas. The T-Mobile network grew and grew.
T-Mobile took the attitude that every time they stole a customer from Verizon or AT&T they gained a little bit of revenue and cost Verizon and AT&T a lot of revenue. It was a double-win. And, since the new T-Mobile network was vastly under-utilized there was no incremental cost to adding customers. This realization was super-smart of T-Mobile because it allowed them to gain critical mass.
T-Mobile relentlessly gave customers what they wanted:
- Contract-free experience
- Low prices
- Global free roaming
- Unlimited usage.
- Every time T-Mobile identified something that customers hated they would fix it. And, customers aren’t stupid. As the network got better and better they switched in droves.
Now, I have survived a number of industry price wars. What I know is that when they happen you die unless you play along. And, you minimize your debt so you can survive. Eventually, things straighten around. Verizon ballooned its debt by buying out its largest shareholder. (Bad move.) So Verizon has been cash strapped and hasn’t invested as much on their network and predictably their network has gotten pretty bad in some areas.
T-Mobile’s moves have been all the right ones. Eliminate contracts and commitments. Build up the network. Give customers free roaming in Canada and Mexico, free roaming throughout the world, and free worldwide texting. Then, they offered unlimited data plans. Did I mention they made their network much, much better?
When T-Mobile started this rebirth I am sure they had staff meetings and somebody said: “But our network sucks!” And, the smart CEO said: “You are framing the question wrong! At what price does the network not suck? Let’s price it at that level and then it’s a good value.” They did it, too!
Well, the T-Mobile network no longer sucks in many areas. In fact, it many areas it is markedly better than Verizon and AT&T.
The CEO is no idiot. He is now raising prices. And, he is doing it the right way. He is grandfathering customers to minimize the shock.
It has been interesting to watch over the last year as T-Mobile raised the price of their 4-phone family plan from $100 a month to $120 and then $140 and now to $160. This is a 60% price increase! The amazing thing is that now that the network is better, it is still a good deal!
The latest T-Mobile price increase is the elimination of all plans except the unlimited data plan. Since most people only need a few gigabytes of data, moving these people up into unlimited plans is essentially a price increase. Yes, there will be the 3% that are data gluttons. But the cell phone business is a numbers game and is all about averages. On average, this is a price increase because on average people consume the data they need, and not more.
I applaud how T-Mobile has grown from a third rate terrible company to one that has a good network and one that can raise prices. They have done everything perfectly. They are a model to be followed.
T-Mobile increased value, gave customers everything that they wanted, and then made the product better. It’s been wonderful to watch.