Could wireless voice service go extinct?

A new T-Mobile plan suggests carriers may be looking at more data-centric plans that include few to no voice minutes.

Roger Cheng Former Executive Editor / Head of News
Roger Cheng (he/him/his) was the executive editor in charge of CNET News, managing everything from daily breaking news to in-depth investigative packages. Prior to this, he was on the telecommunications beat and wrote for Dow Jones Newswires and The Wall Street Journal for nearly a decade and got his start writing and laying out pages at a local paper in Southern California. He's a devoted Trojan alum and thinks sleep is the perfect -- if unattainable -- hobby for a parent.
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Roger Cheng
3 min read

SAN DIEGO--How often do you actually talk on your cell phone?

The answer, for a lot of people, is much less than they used to. With apps that power text messages and instant messaging, social networks such as Facebook and Twitter, and Internet-based phone services freely available, there are a lot of alternatives to making a traditional phone call.

At least one carrier is catching on. Last week, T-Mobile and Wal-Mart said they would offer a no-contract plan with unlimited data and text messages--but only the 100 minutes for phone calls. The cost: $30, which is the same amount as a data plan add-on for smartphones at Verizon Wireless. T-Mobile's new offering could herald a potential new way of offering services to consumers--many of whom no longer use their voice minutes.

"For users on the T-Mobile plan, the incentives are clear. Don't call...text or e-mail (or Facebook) instead," said Craig Moffett, an analyst at Sanford C. Bernstein.

Carriers have long relied on a bundle of services--voice minutes, text messages and data services--with voice as the constant anchor. With fewer people using their phone for actual phone calls, the voice component of the plan has become an increasingly profitable element for the carriers. The T-Mobile offering, however, may upend the status quo for service plans.

"T-Mobile USA might have taken the first step in ending the required and highly profitable charges for wireless voice services on smartphones," Walter Piecyk, an analyst at BTIG Research, said in a blog posting last week.

T-Mobile, for its part, doesn't believe the plan will cannibalize its other plans. Brad Duea, senior vice president for T-Mobile, told CNET on Monday that the new plan targets a younger demographic. The company declined to comment further on where phone plans may go in the future.

Indeed, the plan is expected to compete for young text-heavy users and Internet junkies against Sprint's Virgin Mobile, and its placement at Wal-Mart is expected to pose a threat to Tracfone Wireless and Leap Wireless, which also recently expanded to national retailers.

But T-Mobile's actions speak louder than words. The carrier on Monday unveiled a mobile app version of its Bobsled Web-based chat service. The app enables free phone calls, riding on the data connection rather than using voice minutes. The service works on any iOS or Android phone, which means an iPhone customer can use their data plan to make calls to save out on their minutes.

A profit engine for carriers
Voice services aren't going away any time soon. They remain too profitable a component of a customer's phone bill for carriers. There also remains a large percentage of the population that still relies on the phone for basic phone calls.

Duea said that there remains a large demographic of people who still want to use voice minutes. He doesn't believe the plan will cannibalize its core plans.

T-Mobile has for the past year played the role of price disrupter, introducing new and aggressive plans to sway customers back into its fold. The carrier has been dealing with an exodus of its most valuable contract customers.

In the second quarter, T-Mobile lost 50,000 net total customers, but 281,000 customers who signed a two-year service contract.

It remains to be seen whether the Wal-Mart offering will be a success. But analysts note that consumers are starting to realize that they are paying too much for some of their wireless service.

"We believe that smartphone customers are decreasingly interested in using their device for voice services," Piecyk said.

Family plan for data
The eventual goal for the wireless industry has been the introduction of a family plan based on a bucket of data. Consumers can draw from this bucket to power the various devices in their home, from their smartphones to their tablets and set-top boxes.

AT&T's head of mobility, Ralph de la Vega, and Verizon Communications CEO Lowell McAdam have both talked about the concept, although both carriers have yet to make any move towards this direction.

Eventually, they concede, Internet-based voice service could replace traditional voice service on the cellular network. The Web-based voice service, similar to T-Mobile's Bobsled, would count against a customer's data plan.

But don't hold your breath for the carriers to start making this change anytime soon.