The only thing constant is change itself.
The person cited with this brilliant insight is Greek philosopher Heraclitus, who must have foreseen how things would play out in the technology industries of the modern world. As with the weather, you have to give tech only a few hours these days before things change.
Sprint Nextel (NYSE: S) took Heraclitus to heart recently and decided to be an agent of change for consumer wireless services. The company has quietly been testing a new level of services that I believe will once again redefine how people use wireless phones and services in the U.S. and eventually abroad.
The trial service, aptly dubbed "All-You-Can-Talk," was introduced for a limited time in select markets, featuring unlimited use of voice and text services across the United States on Sprint's network. That means users can talk and type out short messages 24/7 and pay a flat fee of $120 per month. No more overage charges or counting minutes and messages.
The Sprint plan can also have unlimited broadband data added for an additional $30 per month. So for a mere $150 each month, you could have it all -- unlimited voice, data, and broadband access -- and all of it mobile across the United States.
At first glance, this may not seem all that significant an event to most people. The cost of the plan is out of reach for the bulk of wireless users -- the average U.S. user chews up roughly 800 minutes each month, which puts most people on plans that cost around $40-$50 per month. Only "power users" or business customers who require frequent calling tend to exceed 1,000 minutes per month during peak times. Furthermore, all-you-can-talk plans are not new -- several other carriers have been pushing them for years.
Many regional wireless-service providers have been offering unlimited-use plans -- Leap Wireless has been doing so since its start in the late 1990s. But the unlimited part of Leap's plans applies only on its own network, so extra charges for roaming can come into play if you're not in one of Leap's covered markets. National service providers such as Sprint and AT&T (NYSE: T) have extensive networks across most of the populated U.S., so roaming charges are not often an issue, unless you travel internationally.
Other smaller wireless companies have been offering unlimited plans, too. Many mobile virtual network operators (MVNOs) -- companies such as Amp'd Mobile, Disney Mobile, and Virgin Mobile that resell branded wireless service -- have been forcing the hand of their larger competitors by offering unlimited plans as well. For instance, Amp'd offers a plan that includes unlimited talk, text, and picture/video messaging for $150 per month.
The shrinking limits of unlimited
But with its wider footprint and distribution, Sprint is taking the idea of flat-rate unlimited plans to a whole new level and likely sparking the next revolution in consumer-wireless service in the process. Back in 1998, AT&T Wireless' "One Rate" plan revolutionized the way Americans used cellular phones. Up until that point, users had to pay additional fees for long-distance calls as well as for calls made while roaming away from AT&T's network. The One Rate plan included long distance and roaming in the basic plan price, so users didn't have to worry about whom they were calling and from where.
Now Sprint is testing whether it can profitably offer consumers another major benefit -- not worrying at all about total minutes or message use. The trick will be to properly price the plan so that a significant number of users will actually scale up and pay more for the unlimited plan. This will help offset the revenue lost from power users who would now be saving money on the new plans.
While the other major wireless carriers have remained mum, the likes of AT&T, Verizon (NYSE: VZ), and Deutsche Telekom's T-Mobile will certainly be pressured to match Sprint if it launches unlimited plans on a wide scale. Service providers that fail to offer similar, competitive plans stand to lose a profitable portion of their subscriber base to churn.
Forcing the hand
One strategy behind all-you-can-talk plans is to lure consumers and businesspeople away from traditional landline telephones to go all wireless. With the unlimited plans, it's now more feasible for someone to ditch traditional services -- phone and even DSL -- to get it all from Sprint for a flat fee. The benefit of having services anywhere in the U.S. is certainly an added bonus. The regional carriers have already been successful at using unlimited plans to help people make a wireless phone their only phone.
The other key element behind unlimited plans is to ward off competition and protect the incumbency of the major wireless carriers in the United States. All of the major cable companies, including Time Warner Cable (NYSE: TWC) and Comcast (Nasdaq: CMCSA), are looking at growing their communications revenues by invading telephony, broadband, and wireless markets to offer them all as a complete package. Wireless incumbents also want to keep ahead of new threats from the likes of Vonage (NYSE: VG), eBay's Skype, and Clearwire (Nasdaq: CLWR) -- all bent on stealing some of the lucrative services away from traditional communications providers.
With the U.S. wireless market nearing saturation -- and all the threats facing wireless carriers -- the question is not whether unlimited plans will be offered on a wide scale, it's when. For incumbent carriers looking to protect a user base and maintain cash flow, unlimited plans are the next logical step for consumer wireless services.
For related Foolishness:
- Sprint Nextel's Loud and Clear: Fool by Numbers
- Verizon Goes for Vonage's Jugular
- Comcast: A Rediscovered Highflier
AT&T is a former recommendation of the Motley Fool Stock Advisor newsletter service, and eBay is a current pick. To see what stocks are still making the cut, check out Tom and David Gardner's flagship newsletter service free for 30 days.
Fool contributor Dave Mock is a flat-rate kinda guy -- no punches pulled here. He owns no shares of companies mentioned in this article. Dave is the author of The Qualcomm Equation. The Fool's disclosure policy doesn't charge for roaming, long distance, or frequent trips to the bathroom.