Verizon vs. AT&T
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Introduction
In the American telecommunications industry, the two leading companies engaged in a neck-to-neck battle are Verizon and AT&T. With both companies fighting to be the leading brand in this industry across voice and data services, it is important to understand the corporate culture of the two companies and how each approaches the market. Starting with a little of the company history, it is possible to put together each company’s approach to the market and what relative advantages each holds in the marketplace today. In addition, each company has been using its marketing and social media to promote not only itself but also various corporate social responsibility initiatives. We look at how these are brought about.
AT&T (or American Telephone & Telegraph) is the world’s first telephone company. It was born out of Alexander Graham Bell’s invention of the telephone. In existence for over 130 years in various forms, AT&T is today one of the largest telecom service providers in the world, catering to voice, data and enterprise data solutions that span the globe. In 1984, the company divested itself into several parts, each working independently. Many of these later helped for the other telecom companies that make up the US telecom market. SBC one of the arms so formed acquired Pacific Telesis in 1997, SNET in 1998 and Ameritech Corp. in 1999 to expand its operations. In 2005, with the acquisition of AT&T Corp., the data & R&D business separated earlier, SBC created the new AT&T (AT&T Website, 2014).
Verizon Wireless – History
Created from the merger of Bell Atlantic and GTE in 2000, Verizon is essentially a merger of Bell Atlantic and Vodafone’s US operations. It rapidly grew to become the second largest telecom carrier in the US and was listed on the Dow Jones index in 2004 (Verizon Website, 2014). Through a series of acquisitions over time and with the launch of 3G, 4G LTE, fiber-optic services and international business operations in data, the company grew to be among the top international telecom companies worldwide. Vodafone remains one of the significant shareholders in the company.
Marketing approach
Going by recent performance in the market, Verizon has outdone AT&T in acquiring new customers consistently over the last few years. The success of Verizon can be attributed to its entire approach to customers, rather than purely its marketing strategy. Verizon works to ensure great quality service and options to its customers. By bundling various products and services in innovative ways, it has been able to charge a premium.
AT&T has spent most of its marketing dollars on telling customers how big the company is and the spread of its network, focusing on the history associated with its corporate brand. Its main marketing approach has been to attack Verizon’s claims, instead of looking of unique ways in which it can serve the customer (Baskin, 2012). In many ways, the AT&T vs. Verizon marketing battle reminds us of the PC vs. Apple advertisement series that was so instrumental in popularizing the iMac. While AT&T received a significant boost by being the first (and only) carrier to offer the iPhone when it was launched in 2007, thereby giving it many new subscribers thanks to the popularity of the iPhone, it has done little to build up the customer base since.
Distribution
AT&T has been spending extensively in the last six months to increase its network for 4G LTE services. The company has spent over $23 Billion on capital projects. This represents nearly 18% of its total revenue for the first six months of the year. It had announced in 2012 that it would spend over $12 Billion in ramping up its broadband and 4G LTE infrastructures to enhance wireless and wire line capacity to support high-speed data connectivity. In this respect, it is working hard to catch up with Verizon, whose data connectivity is far superior and claims to reach 97 % of Americans (see image below).
Image 1: Verizon 4G LTE coverage in USA vs. competitors (Image courtesy: Verizon, 2014)
Thanks to its coverage, Verizon has combined its voice and 4G data coverage into a single high speed network. This enables better call quality, lesser incidence of call drops and better performance on hi-resolution video calling. Since Verizon has 4G across the country which runs at 10 times the speed of 3G, AT&T has no option but to invest in creating the infrastructure for 4G networks if it wishes to remain competitive. In recent studies, Verizon also proved to be the fastest wireless internet service provider, beating AT&T and other competitors on most parameters (Parker, 2014).
Pricing
Both Verizon and AT&T are competing for the same set of customers. With internet penetration in excess of 100 %, the only way they can get new customers is by targeting each other’s subscriber base or those of the smaller players. With devices like the iPhone no longer being the exclusive domain of one carrier (AT&T had that monopoly with the first iPhone but lost it later), pricing and connectivity are the key denominators that determine customers’ choice of their telecom operator. As can be seen from the comparative table below, Sprint has some of the lowest data plans. However, Sprint’s network connectivity is considered very poor in many areas and that leaves AT&T and Verizon competing for the most customers.
Image 2: Comparative plans: AT&T, Verizon and Sprint (Image courtesy: Rogowsky, 2014)
As we can see from the table, the pricing on Verizon and AT&T is evenly matched, except at the low usage point where AT&T does not offer a plan to match Verizon. However, this trend of matching prices between AT&T and Verizon has been going on for the last couple of years, raising questions of collusion and anti-competitive behavior between the two companies (Kuittinen, 2012).
However, pricing in the case of telecom carriers is not so simple. Apart from the price of the plan, subscribers also pay for the handset – either upfront or in a phased manner – depending on the plan they have chosen. Upgrading old handsets to new ones also has a differential cost, as do the use of voice and data services in combination. While the above information provides the basic rules for comparison, every individual’s plans will vary depending on the number of lines, the handsets being used and the usage of voice and data services.
In addition, service providers keep offering upgrades to plans often, thereby creating even more confusion in the minds of consumers (Newman, 2014). Trying to understand the various permutations and combinations for the plans can leave anyone confused. Even the executives in the store are sometimes confused and forget what each plan offers.
Promotion
Both AT&T and Verizon are major advertising spenders in the US, mainly during the summer and holiday seasons. In addition, each has spent significant amounts of money on advertising new launches like the iPhone and Samsung Galaxy series. As a result, wireless services are one of the biggest categories of ad spenders, totaling $5.3 Billion on measured media last year (McDermott, 2013). The key messages that have been communicated are not focused on price. However, network reach and speed have been the major talking points for all the carriers in recent advertising messages.
Both companies focus on churn to generate numbers as the market is presently saturated. However, neither AT&T nor Verizon have unlimited data plans for new subscribers, and have restrictions on usage for old customers who wish to upgrade their handset as well.
As a result, few customers are looking to change service providers, and both AT&T and Verizon have the same market share among consumers. Both hold about 34 % of the market share, with the rest being shared among T-Mobile, Sprint and the smaller and regional carriers (Imtiaz, 2014).
In marketing communication, Verizon has been focusing on the speed and extent of its 4G LTE service network. Meanwhile, AT&T has tried to build on its image as the “best” 4G network, and is taking on Verizon and Sprint in the print media for speed and reliability issues. This is aggressively targeting rivals, but AT&T needs to do so if it is looking to acquire more customers in order to justify the increased investment it has made in ramping up its 4G network.
Placing Product in the Market
Both AT&T and Verizon have a distribution network far superior to any of the other carriers, as is reflected by their market share. In addition, each carrier has close ties with handset manufacturers to launch their products on the respective networks in order to retain and add to their existing customer base. Therefore, in terms of market reach there is little to differentiate the two companies at the gross level. Verizon continues to focus on its service quality and since pricing on the two networks are almost similar, very little churn takes place between the two competitors. Another reason for the lack of churn is the cost of handset that a consumer has to bear with each change, since neither network allows customers to bring their existing handsets to the new network. With high end smartphones now having a lock-in period of close to two years, this is a major deterrent for customers to switch. Therefore, in spite of significant efforts by both companies, there remains little to convince customers to switch from one carrier to another.
The best example of comparing the two companies is the choice of carrier for the iPhone. While both companies offer the iPhone (6, 5C and 5S), the cost of their plans are not the same. Since Apple controls the price of the iPhone, both charge the same for the device. The respective voice and data plans are also similar. But, in the case of Verizon, only with the iPhone 6 can subscribers use both voice and data simultaneously (Costello, 2014). AT&T has the advantage here over Verizon.
Global Marketing Arena and Effect of Cultural Diversity on Marketing Environment
Since both AT&T and Verizon are Pan-American service providers, there is little to distinguish in their cultural approach towards marketing. However, the key difference lies in the age of the two organizations. While AT&T is an old firm and proudly talks of its heritage, Verizon focuses on youth, reliability, speed and service. While AT&T’s messaging appeals more to a mature market, the Verizon messaging is aimed at the younger generation. Since the latter are more frequent users of smartphones and are likely to buy the latest handset more frequently than older users, this strategy seem to have paid off for Verizon. Earlier, AT&T had sole rights to the iPhone and there were significant level of dissatisfaction among consumers who complained about the slow service and poor customer service of AT&T. However, AT&T has also been making improvements to its service, customer handling and overall image, in order to compete with Verizon, now that the iPhone is no longer its monopoly. Very little difference can be seen in terms of cultural, gender or any other demographic diversity in terms of the campaigns that AT&T or Verizon run to attract customers.
Marketing’s Role in promoting Social Responsibility, Social Causes and Sustainable Development
Being significant public corporations listed in the US, both Verizon and AT&T have corporate social responsibility programs and community development programs aimed at improving the community and the lives of people. The social responsibility programs of each company have been outlined below:
AT&T:
AT&T’s social responsibility programs are aimed in three specific areas: community, environment and technology.
Within community, the focus of AT&T’s efforts has been on education and on veteran’s issues. Under its Aspire program, AT&T has committed to invest $350 Million in education programs with an aim to improve the high school completion rate. The program’s target is to reach a national graduation rate of 90 % by 2020. Employees mentor students to ensure they complete school. Employees will contribute over 1 Million hours of time by 2016 through the Mentor Academy for students. For veterans, the company has made a commitment to hire 10,000 veterans and their family over the next five years in support of the veterans.
For the environment, the company has been working with Environment Defense fund to work on reducing the water consumption required for cooling its network servers by 14 to 40% across the board. Through various environmental initiatives, the company has also realized savings of $191 Million between 2010 and 2013.
On the technology and safety front, the company is raising awareness of the dangers of texting on the phone while driving. The movement, called “It Can Wait” has received over 4 Million pledges from customers not to text while driving. Similarly, the company is driving awareness among consumers about the radiation levels of their phones and how to recycle the handsets and batteries in a responsible manner.
The company’s focus for 2014 extends beyond these areas to improving supply chain, reuse and recycle of devices, ICT based sustainability solutions and towards transforming education (AT&T, 2013).
Verizon
Verizon’s community programs and social responsibility initiatives are centered on three aspects – Education, Healthcare and Sustainability. In education, the company works towards empowering students and teachers. Through two of its programs, Verizon Mobile Learning Academy and the Verizon Innovative App Challenge, the company is looking to drive students’ interest in STEM (Science, Technology, Engineering and Mathematics) subjects to fill the gap between supply and demand in this sector.
In healthcare, the company works with leading healthcare institutions and doctors to improve patients’ access to healthcare services. The company supports telemedicine and remote diagnostics services for a number of rural areas. They also support information services on healthcare for low-income communities in order to make it accessible to all.
In sustainability, the company is working on reducing its carbon footprint by using alternative renewable power sources such as solar energy. The company has committed to build a solar power facility that will generate more than 89 Million kilowatt hours of electricity every year, enough to power all the Verizon critical data centers, central offices and office buildings across six states.
Conclusion
AT&T and Verizon are today the giants of telecom in the US. Together they control nearly 70 % of the market and have very similar market shares. Due to saturation in the market, the only way they can compete is by churning each other’s subscribers. In terms of the quality, pricing and promotions, the two have very little to differentiate them, but Verizon’s early investments in $G LTE networks give them a temporary advantage. The brand image for Verizon is also aimed at the younger generation and this has helped the company gain market share rapidly. However, with AT&T making significant investments in technology and development, the battle between the two is likely to remain intense for the coming years.
References
AT&T (2013) AT&T 2013 Annual Sustainability Update, AT&T, retrieved from http://about.att.com/content/dam/csr/PDFs/att-2013-annual-update.pdf
AT&T (2014) Corporate Website, AT&T, retrieved from http://www.att.com
Baskin, J (2012) Verizon's Brand Narrative Trumps AT&T's Brand Promises, Ad Age, retrieved from http://adage.com/article/cmo-strategy/verizon-s-brand-narrative-trumps-brand-promises/238036/
Costello, S (2014) Verizon vs AT&T vs T-Mobile vs Sprint: Which to Choose For iPhone, About Technology, retrieved from http://ipod.about.com/od/beforeyoubuy/a/Verizon-Iphone-Versus-Atandt-Iphone.htm
Imtiaz, A (2014) AT&T and Verizon have Similar Market Share, US Finance Post, retrieved from http://usfinancepost.com/att-and-verizon-shares-similar-market-share-19423.html
Kuittinen, T (2012) Are AT&T And Verizon Finally Going Too Far?, Forbes, retrieved from http://www.forbes.com/sites/terokuittinen/2012/08/24/are-att-and-verizon-finally-going-too-far/
McDermott, J (2013) Sprint, T-Mobile to Spend Big in Pursuit of Verizon, AT&T, Ad Age, retrieved from http://adage.com/article/digital/sprint-t-mobile-spend-big-pursuit-verizon-t/242953/
Newman, J (2014) Which Wireless Plan Is Cheapest?, Time, retrieved from http://time.com/7982/which-wireless-plan-is-cheapest/
Nichols B (2014) Is AT&T Making Wise Bets on Its Future?, The Motley Fool, retrieved from http://www.fool.com/investing/general/2014/10/03/is-att-making-wise-bets-on-its-future.aspx
Parker, T (2014) Verizon snags 'fastest LTE network' crown from AT&T in new test, Fiercewirelesstech, retrieved from http://www.fiercewireless.com/tech/story/verizon-snags-fastest-lte-network-crown-att-new-test/2014-06-11
Rogowsky M (2014) Mobile Wars: AT&T Goes Whale Hunting, But Verizon, Sprint Bite Back as Data Prices Continue to Fall, Forbes, retrieved from http://www.forbes.com/sites/markrogowsky/2014/10/02/mobile-wars-att-goes-whale-hunting-but-verizon-sprint-bite-back-as-data-prices-continue-to-fall/
Verizon (2014) Corporate Website, Verizon, retrieved from http://www.verizon.com/
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