Mobile service providers brace for the economic storm

Your cellular-service provider is no more immune to the effects of financial panic than anyone else, and as the economy contracts, certain "unlimited" voice and data plans may, in fact, find themselves limited.

Verizon announced Friday that it will up fees by 3 cents/message for firms that send SMS messages to users -- a move that's likely to put a serious crunch on businesses designed around that testing model. Meanwhile, earlier in the week AT&T lowered the boom on customers of its pre-paid GoPhone data service who used it to plug their laptops into mobile-broadband services. AT&T announced that it'll discontinue its $19.99/month service plan, which it framed as a trial offer that had run its course.

Mobile broadband might, more broadly, find itself at the epicenter of cutbacks as the economy worsens. As consumers and businesses ponder how to pare down expenses for the time being, services less central to current mobile-access usage patterns are likely to be the first thrown under the bus when cost-cutting gets serious.

For businesses, which have been the most enthusiastic adopters of mobile e-mail and Web services, that's apt to mean cuts to mobile broadband use. Some business users may find their companies instituting caps on usage or requiring that multiple users share a data plan and gear, according to Dan Shey, ABI Research's principal business mobility analyst. "Business is buying mobile broadband services," Shey told BetaNews, "and in the current climate we could see uptake cut a bit. If a business was considering buying mobile broadband for laptops, it might say 'well, we don't need that right now.'"

The loser in that scenario could be Sprint Nextel, which has a lot riding on its recent WiMAX rollout. "The timing's unfortunate for Sprint," Shey remarked. "The [WiMAX] network speeds far exceed others, but in other ways they're in a competitively weak position, and they're trying to introduce a new service. That requires media spending, new thinking, new gear. This was the time for them. They were counting on these WiMAX rollouts to change the game."

For consumers, cost-cutting is likely to mean fewer frivolous purchases such as downloads and screensavers. But mobile phone service is actually better positioned for tough economic times than landline services, says Shey -- not only because users find voice and texting hard to do without, but because a mobile phone doesn't have to stay behind if one loses one's home to foreclosure.

Also on the consumer side, expect tough times to put a twist on the eternal conflict between service providers and phone manufacturers.

An NPD Group study released in late August already showed signs that handset sales were down, and UBS analyst Maynard Um put some numbers to that this week, predicting mere 3% growth for global handset sales. As the situation unfolds, consumers are apt to hang on to their old handsets just a bit longer. That doesn't help get people into the stores where they can be upsold on service plans, but if gives service providers perhaps some leverage for getting better prices on gear.

And what about those unlimited-use plans? It's possible that unlimited voice plans may be amended with new, well, limits -- caps may be instituted, or prices could go up. It is however unlikely that they'll go away completely -- especially since tough times may mean a fruitful customer-poaching season for stronger competitors, and like the song says, you've gotta have a gimmick.

But changes to data plans may be more interesting. "Some businesses may decide to cut an office and go mobile," said Shey. "But the risk of people using mobile broadband beyond the capacity that operators can provide is that unlike voice service, data service has wide load fluctuations. If operators start to see [trouble], they're going to keep an eye on that."