While the big cable and telephone companies -- along with Vonage -- are charging roughly $25 a month for Voice-over-Internet Protocol phone service, T-Mobile has made VoIP a loss leader.
T-Mobile, a subsidiary of Germanys Deutsche Telekom, announced T-Mobile@Home on Wednesday, a new plan for cell subscribers to get unlimited VoIP service for $10 a month using traditional wired or wireless phones. A $50 router is required, as well as home broadband service and T-Mobile cell service.
T-Mobiles offering allows subscribers to keep existing phone numbers, with home and cell service accessible on the same handset. Subscribers can also use cell features -- like personalized ringtones -- on home lines. By virtually giving away home service, T-Mobile hopes to hopes to retain and attract subscribers.
LIFESTYLE CHANGES
The move aligns T-Mobiles service with the lifestyles of many young, urban users, where T-Mobiles coverage is strongest. Many such customers say they have given up a home phone line, relying completely on cell service. For young people on the go, home service is of limited utility but cell coverage is flaky enough that not having a backup service can be problematic.
Joe Sims, vice president and general manager of T-Mobile USA, said the @Home service is targeted at families who arent ready to go all-mobile. The company tested @Home in Dallas and Seattle, where 97 percent of customers with a traditional landline phone dropped the service after adopting T-Mobile@Home.
At $10 a month, the service isnt making big bucks for T-Mobile. Rather, the service is about reducing subscriber churn, Sims said.
REDUCING CHURN
T-Mobile USA President Robert Dotson said the new service is taking on the big telcos. "For years the traditional landline companies have been great at consistently delivering one thing to their customers -- a high monthly bill," he said. "T-Mobile is now delivering the best-priced home phone service in America for our existing and future customers."
But the move isnt about AT&Ts home phone service. Its about AT&Ts -- and Verizons and Sprints -- mobile services. As a scrappy up-and-comer still competing in limited markets, T-Mobile is offering an intriguing carrot as mobile carriers battle for each others customers.
"In todays cellular environment, its all about reducing churn," said Charles Golvin, an analyst with Forrester Research.
COMPETING FOR CELL CUSTOMERS
T-Mobile already has had success combining broadband and cellular. Last year, it launched Hotspot@Home, offering unlimited calling from T-Mobile hotspots, a move that converted 45 percent of T-Mobile Wi-Fi users into cell customers, according to Sims.
If T-Mobiles plan convinces its larger competitors to drive down the price of VoIP, it could mean big trouble for companies like Vonage, which could find itself trying to sell a service other companies are giving away. "It really puts a lot of pressure from the price standpoint," Michael Gartenberg, a research director at JupiterResearch, told BusinessWeek. "At $10, you are trending down to practically free. It changes the game."
While AT&T and Verizon may be well positioned to do this, they are "likely to be ambivalent about VoIP because they have landline revenues," said Greg Sterling, principal analyst with Sterling Market Research. "And in some ways this runs contrary to trends because consumers are giving up landlines, especially younger consumers. It may be a good strategy for T-Mobile, however, as it tries to expand its footprint. Prices will only come down if T-Mobiles program is successful."
T-Mobile, a subsidiary of Germanys Deutsche Telekom, announced T-Mobile@Home on Wednesday, a new plan for cell subscribers to get unlimited VoIP service for $10 a month using traditional wired or wireless phones. A $50 router is required, as well as home broadband service and T-Mobile cell service.
T-Mobiles offering allows subscribers to keep existing phone numbers, with home and cell service accessible on the same handset. Subscribers can also use cell features -- like personalized ringtones -- on home lines. By virtually giving away home service, T-Mobile hopes to hopes to retain and attract subscribers.
LIFESTYLE CHANGES
The move aligns T-Mobiles service with the lifestyles of many young, urban users, where T-Mobiles coverage is strongest. Many such customers say they have given up a home phone line, relying completely on cell service. For young people on the go, home service is of limited utility but cell coverage is flaky enough that not having a backup service can be problematic.
Joe Sims, vice president and general manager of T-Mobile USA, said the @Home service is targeted at families who arent ready to go all-mobile. The company tested @Home in Dallas and Seattle, where 97 percent of customers with a traditional landline phone dropped the service after adopting T-Mobile@Home.
At $10 a month, the service isnt making big bucks for T-Mobile. Rather, the service is about reducing subscriber churn, Sims said.
REDUCING CHURN
T-Mobile USA President Robert Dotson said the new service is taking on the big telcos. "For years the traditional landline companies have been great at consistently delivering one thing to their customers -- a high monthly bill," he said. "T-Mobile is now delivering the best-priced home phone service in America for our existing and future customers."
But the move isnt about AT&Ts home phone service. Its about AT&Ts -- and Verizons and Sprints -- mobile services. As a scrappy up-and-comer still competing in limited markets, T-Mobile is offering an intriguing carrot as mobile carriers battle for each others customers.
"In todays cellular environment, its all about reducing churn," said Charles Golvin, an analyst with Forrester Research.
COMPETING FOR CELL CUSTOMERS
T-Mobile already has had success combining broadband and cellular. Last year, it launched Hotspot@Home, offering unlimited calling from T-Mobile hotspots, a move that converted 45 percent of T-Mobile Wi-Fi users into cell customers, according to Sims.
If T-Mobiles plan convinces its larger competitors to drive down the price of VoIP, it could mean big trouble for companies like Vonage, which could find itself trying to sell a service other companies are giving away. "It really puts a lot of pressure from the price standpoint," Michael Gartenberg, a research director at JupiterResearch, told BusinessWeek. "At $10, you are trending down to practically free. It changes the game."
While AT&T and Verizon may be well positioned to do this, they are "likely to be ambivalent about VoIP because they have landline revenues," said Greg Sterling, principal analyst with Sterling Market Research. "And in some ways this runs contrary to trends because consumers are giving up landlines, especially younger consumers. It may be a good strategy for T-Mobile, however, as it tries to expand its footprint. Prices will only come down if T-Mobiles program is successful."
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