When we hear about cord cutting, it’s generally in reference to consumers looking for alternative solutions to access cable TV while avoiding the outrageous cost of a monthly contract with a provider.
Dissatisfied with their lack of options, consumers have pushed for change. Now, the industry is exploding with new options at every turn, like Roku, Apple TV and Google’s Chromecast. Big-name TV providers, like Comcast and Time Warner, have no choice but to pay attention as consumers cut their cords.
The mobile phone industry is on the cusp of a similar shift. Phone usage has completely pivoted in recent years, with the number of phone calls drastically decreasing and the use of mobile messaging skyrocketing. A study by Activate even found that the use of messaging apps and number of active users has grown faster in popularity than social networking platforms, like Instagram, Snapchat or Pinterest.
This isn’t necessarily surprising. The conversation around the growth of messaging, SMS and mobile apps has echoed throughout the mobile industry, highlighting that many consumers are no longer using their mobile devices for what they were originally intended for – phone calls. Yet most mobile plans still use voice calling as a base.
Hang up the phone
Ironically, mobile messaging’s drastic growth has had seemingly little impact on major carriers in the space. Carriers are getting away with charging unbelievable rates for monthly phone plans. In the fourth quarter 2015, the Average Revenue Per User (ARPU) in the United States among mobile carriers was $45, the highest in the world. These plans include phone calling, texting and data, even though most users could benefit from a data-only plan, which is unavailable from most of the top carriers.
The industry is clearly ripe for disruption, as evidenced by consumer’s changing preferences and behaviors in how they use their mobile devices. It could be that we see a similar cord cutting phenomenon with phone providers as we did with TV. Companies like Google are exploring alternative options to meet this consumer demand, as evidenced by its Project Fi offering. Google Voice has also allowed consumers to make long distance calls for a fraction of the cost mobile carriers are charging, offering consumers yet another affordable option to avoid traditional mobile carriers.
Will Mobile Carriers Survive?
It’s unlikely that mobile carriers will be pushed out completely by new providers, but they’re likely to face stiff competition from previously unexpected competitors. Aside from Google, there are many other affordable over-the-top (OTT) options available for voice calling alone, including Skype and Viber. These emerging organizations understand the importance of wireless services, consumer needs and the options end users are looking for.
So where do carriers go from here? Major players in the space need to rethink their strategies and start delivering choices aside from what they’ve grown comfortable with. There isn’t a specific roadmap of what that looks like, whether it’s offering mobile options a la carte, eliminating voice calling from traditional plans, moving to data only plans or allowing the flexibility for users to pay only for what they use and get refunded for what they don’t.
While it seems like a drastic move, it’s one that is being driven by consumers and that may eventually be pushed by government regulators, too, to avoid unreasonably high charges and little choice. Mobile carriers are going to be put under an increasing amount of pressure to catch up to consumer’s preferences and those who can best adapt will dominate the market.