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Get ready to pay more for your telecom service

Following in the footsteps of the nation's largest wireless service providers, network operators of all shapes and sizes are preparing to increase service prices amid rising inflation and under the cloud of a potential recession.

"We are not raising our core service prices, but we have reviewed and are adjusting our prices for ancillary items to be more reflective of our costs for those items if the subscribers opt in," Bill Baker, CEO of fixed wireless Internet provider Nextlink, wrote in response to questions from Light Reading. He said that the operator has spent a significant amount of time considering price hikes for things like equipment installation or in-home Wi-Fi, to offset rising inflation.

"Increased fuel prices alone are a material impact on our business," he added.

Nextlink isn't alone.

"I've been getting the question lately about raising broadband rates," wrote Doug Dawson, an analyst with CCG Consulting. "I don't think there is a decision that smaller ISPs [Internet service providers] agonize over more than the idea of increasing prices to customers. The question is obviously being raised now due to inflation."

Dawson continued: "Small ISPs see their costs increasing for fuel, materials, and requests from employees for salary increases – and ISPs see margins shrinking."

Pulling levers

But other network providers are holding off on raising prices.

"Starry is not currently contemplating any price increases on our existing plans," wrote Virginia Lam Abrams, co-founder and SVP of government affairs and strategic advancement at fixed wireless provider Starry, in response to questions from Light Reading.

Wired or wireless, the cost of staying connected is going up for many in the US.
 (Source: Piotr Adamowicz / Alamy Stock Photo)
Wired or wireless, the cost of staying connected is going up for many in the US.
(Source: Piotr Adamowicz / Alamy Stock Photo)

Nonetheless, financial analysts are warning that some of the nation's biggest providers are preparing price hikes on top of what they've already implemented. In recent weeks, AT&T, Verizon and T-Mobile have all moved to increase service prices or add fees.

"Wireless operators in the United States are getting increasingly comfortable with implementing price increases," wrote the financial analysts at LightShed Partners. "Over the past two months they added over $3 billion of recurring service revenue through increases to administrative fees and outright rate plan changes to existing subscribers. But is this enough to hit revenue and cash flow targets?"

The analysts predicted that more increases are on the horizon. "We believe Verizon needs to increase prices to reach its 2023 revenue guidance," they wrote.

The analysts noted that Verizon could gain more revenues through its existing wholesale MVNO efforts with Comcast and Charter, or potentially through its burgeoning fixed wireless Internet business, but that likely will not be enough to hit its financial targets.

A history of things to come

AT&T kicked off the price increase trend by raising prices for customers subscribing to some older plans. Verizon was next, announcing it would raise prices via "administration" fees on all customers by between $1.30 and $2.20 per month. Then, T-Mobile raised its "assisted support charge" and "upgrade support charge" by around $5 for customers who add new lines or upgrade phones.

Already AT&T's CFO has suggested that the company could raise prices further.

Several factors are putting pressure on the operators. AT&T, Verizon and T-Mobile have all doled out billions of dollars for midband spectrum licenses for 5G, and now they're each spending billions more putting those licenses into action with new 5G equipment. Concurrently, all the operators have hinted that 2022 customer growth rates may slow compared with last year. Further, networking equipment vendors have been almost gleeful in their efforts to increase the cost of their equipment.

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Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano

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