For years,Verizon (NYSE: VZ) has built its wireless business on the idea that it could charge more because of its superior network.
For a long time, that was true and the company beat that message home with its "Can your hear me now?" ad campaign. Over the last year, however, that advantage has lessened. Sprint (NYSE: S) even hired Paul Marcarelli, the guy who uttered Verizon's famous phrase in its ads, to point out that "The 'better' that some other national carriers claim about reliability is really less than a 1% difference."
Sprint was essentially claiming that though not the best, its service is much cheaper, with a good-enough network, compared to Verizon's. That may have won the fourth-place carrier some customers, but now, the new OpenSignal State of Mobile Networks in the United States report -- generally considered one of the two important studies of mobile networks (along with the twice annual RootMetrics report) -- shows thatT-Mobile(NASDAQ: TMUS) has mostly displaced Verizon at the top.
What does the report say?
OpenSignal calls 4G/LTE the "most important mobile technology in the U.S.," noting that it accounts for the vast majority of data connections and a growing amount of voice traffic. That, the research company notes, has shaken up the traditional wireless network ratings.
"Through its LTE network, T-Mobile is now challenging AT&T (NYSE: T) and Verizon's dominance, while Sprint's 4G service is the source of its continued struggles," the company wrote. "It was a close contest, but T-Mobile walked away with OpenSignal's award for fastest LTE speeds, averaging 16.3 Mbps in our summer download tests." Verizon came in second, scoring an average of 15.9 Mbps for is LTE connection, outpacing both Sprint and AT&T, neither of which averaged downloads greater than 13 Mbps.
T-Mobile and Verizon were also the leaders when it came to 4G speeds.
"Verizon and T-Mobile hotly contested our award for fastest 4G speeds. The battle went all the way down to the regional level, as we saw either T-Mobile or Verizon (often both) vying for the top spot in 30 of 31 metro areas," wrote OpenSignal CEO Brendan Gill in an email to The Motley Fool. "While it was a close race, we were able to declare a winner. T-Mobile is now in the top 2 in 4G availability, according to our data. We're definitely seeing T-Mobile's recent investment in 700 MHz spectrum pay off. Those low-frequency airwaves propagate further, and consequently we're seeing T-Mobile LTE signals more often."
Verizon did top the study when it comes to 4G availability, as Gill noted above, but it only beat T-Mobile in that one category.
Image source: OpenSignal.
OpenSignal based its results on 2.8 billion measurements collected by its 120,000 OpenSignal users to compare the nationwide and regional performance of the country's four major operators.
What does this mean?
Aside from the fact that it will almost certainly send T-Mobile CEO John Legere into a state of social media bliss, these findings verify what Sprint has been saying. Network quality is no longer the differentiating factor between wireless companies. If that's the case, then consumers should base their decision on price, which greatly favors T-Mobile and, to a lesser extent, Sprint.
Verizon has been coasting based on its past glory for a few quarters, if not longer. It may take consumers awhile to catch on, but that strategy will produce diminishing results. You can argue about which company has the best wireless network -- the last RootMetrics report gave Verizon the lead -- but it has gotten close enough not to matter.
T-Mobile has caught up to Verizon and it's cheaper. That means Verizon needs to either lower its prices or find a way to justify charging more without basing it on having a better network. That could prove to be a major problem for a carrier that has built its business on overages and higher prices in general.
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Daniel Kline has no position in any stocks mentioned. He is a T-Mobile customer because the company offers cheaper prices. The Motley Fool owns shares of and recommends Verizon Communications. The Motley Fool recommends T-Mobile U.S. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.