How Wireless Carriers Make Their Money

March 6, 2016

Don’t lose billions in wireless expenses! Knowing and understanding how carriers charge organizations and how they make their money helps us manage cost savings and produce results that allow organizations to use mobility in a very cost efficient way.

HOW CARRIERS MAKE THEIR MONEY

Let’s take a look at a round up of the top four carriers in the United States and their financial review from 2014. In total, these carriers produced a whopping $56.3 billion in earnings! So, how are they making this money? A big revenue growth for carriers was smart devices. 86% of all devices are now smart devices. There’s a good chance you’ve already used a few smart devices today. You might even be on one right now! Carriers will grow in the future by continuing to increase connected devices such as tablets, Wi-Fi in cars, household items, etc. to their networks.

Imagine you got your friend a $10 Starbucks gift card as a nice gesture. You gave it to him/her with the hope that he/she would use the whole gift card on delicious drinks and treats. Now, imagine that only $2 of that card was used before he/she lost it or forgot about it. That means that eight of your hard earned dollars have suddenly gone down the drain!

This is how breakage works. This is how the carriers made $45 billion.

Breakage is a term that essentially means money has been spent, but has not been completely used. So many people pay for more data and minutes than they actually use that the value of breakage was $45 billion.

You know that moment of panic when you get a text that lets you know you’ve almost used up your data for the month? Yikes! Don’t go over or else you’ll be paying overage fees.

T-Mobile’s CEO reported that AT&T, Verizon, and Sprint collected $2.4 billion in overage fees alone. When people surpass their rate plan and use more minutes or data than contracted, they are charged with these fees. Since overage and breakage combined represented $47.4 billion of the $56.3 that was earned, 85-90% of the carriers’ earnings came from those fees. That’s how they make their money. Corporations are overspending and value is being left on the table.

How do we fight that?

Our solution is to fight analysis with analysis.

Watch our webinar to find out exactly how we save companies up to millions of dollars each year! If you want to compare your rates to our benchmark rates, we can certainly create an analysis. When you’re ready to reduce the costs of wireless bills for your company, let us help.