Where Prices Aren't Soaring

The January consumer price index showed rising prices across a number of categories: food, energy, furniture, apparel, and vehicles, among others. One category bucking the trend in January was wireless-telephone services, the prices of which were down 0.5% from a year earlier.

That’s not because AT&T, Verizon Communications, and T-Mobile US are slashing prices left and right. Many of their subscribers are likely to be paying more dollars to their carrier each month. But the wireless giants' focus has shifted to add-on services and other bundled plans as a way to increase revenue, not by raising monthly subscription fees.

That trend isn't captured by the methodology used by the Bureau of Labor Statistics, which conducts the CPI survey. The BLS defines wireless telephone services as consumers’ monthly—what the industry calls postpaid—or prepaid plans that include talk, text, and usually data. It also doesn't include monthly payments for smartphones or other devices purchased via a carrier.

It’s similar but slightly narrower than what the wireless companies variably report as their monthly average revenue per user, or ARPU. 

AT&T discloses its postpaid phone ARPU each quarter, which stood at $54.06 in the fourth quarter—down 0.7% year over year because of promotions, the only one of the big three to report a decrease. The company doesn’t disclose its prepaid ARPU, or an overall figure for its subscriber base.

AT&T management’s guidance calls for 3% wireless-service revenue growth in 2022. Chief Financial Officer Pascal Desroches suggested on AT&T’s fourth-quarter earnings call that he expected ARPU to rise going forward.

Verizon doesn’t directly report ARPU, instead disclosing its monthly average revenue per account, or ARPA, which includes all the lines on one postpaid account. That figure was $144.88 in the last three months of 2021, up 2.6% year over year. But Verizon said it had 3.37 postpaid connections per account at the end of last year, yielding an ARPU proxy of $42.99. That’s up less than 0.5% from the same statistic calculated for the end of 2020. Verizon doesn’t disclose its prepaid ARPU.

Verizon CFO Matt Ellis credited the increase in postpaid ARPA in 2021 to customers upgrading to more-expensive plans and buying additional services—not an increase that’s included in the CPI according to the BLS’ methodology.

Finally, T-Mobile deserves some credit for reporting all three of its postpaid ARPA, postpaid phone ARPU, and prepaid ARPU—more disclosure than what AT&T or Verizon offer. Respectively, in the fourth quarter those figures were: $135.04, up 1.5%; $48.03, up 0.4%; and $39.32, up 3.3%.

T-Mobile CFO Peter Osvaldik said on the company’s fourth-quarter earnings call on Feb. 2 that he expected postpaid phone ARPU to be “flat to slightly up year-over-year in 2022,” driven by customers signing up for more-expensive plans. 

In short, Americans are likely to be paying more for their wireless services, just not in the way the CPI measures it. But customers are also getting more for the dollars they send to Verizon, AT&T, and T-Mobile: Higher-tier plans tend to include access to streaming services such as Disney+, HBO Max, and Netflix, plus other add-ons.