Average Mobile Phone Bill in U.S. is Growing Despite Competition
March 10, 2014 10:25 AM
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Wireless carriers are wringing more money out of customers than previous years
One of the reasons that the FCC wants at least four major carriers in the U.S. wireless industry is for greater competition. The general hope is the increased competition will lead to lower prices for consumers, but that well-meaning sentiment isn’t exactly going according to plan.
Carriers aren’t competing aggressively on price and are pushing users to gobble up as much data as possible according to a new report from
The Wall Street Journal
. Carries are also working hard to eliminate smartphone subsidies. "As you approach 90 percent penetration, you move into maintenance mode. That means more device upgrades,”
AT&T CEO Randall Stephenson stated in December
. “And the model has to change. You can't afford to subsidize devices like that."
T-Mobile increased the price of its unlimited data plan by $10 on Friday. Rather than competing on price, the carrier says that it is removing what it calls "pain points" like service contracts and international data rates. Executives at the company don't want to start a price war.
"When you really analyze a lot of the pricing moves that have been made, there has not been a significant repricing," said T-Mobile Chief Financial Officer Braxton Carter.
The average monthly revenue per postpaid users for wireless carriers has grown across the wireless industry by 2.2% to $61.51 in Q4 2013 according to New Street Research. That is an increase of $5 per user compared to Q1 2010. The result of new pricing plans and increased data consumption by wireless subscribers in the U.S. is that revenue has rose 0.9% in Q4 compared to the previous year. That increase is a reversal from long running declines in the industry.
"It has gotten a little more competitive lately, but it isn't effectively competitive yet where the big two have to lower prices,” said Matt Wood, Policy Director for public advocacy group Free Press.
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Telecom was socialized a long, long time ago...
3/12/2014 6:39:47 PM
This article is somewhat misleading in the sense that it suggests that basic economics principles are failing - more competition not resulting in lower prices.
The issue is that telecom is a socialized industry, meaning that it is state controlled via the FCC. The private companies that operate telecom services require extensive licensing and no shortage of political favors in order to have the privilege of setting up and maintaining wired networks as well as wireless towers.
You cannot just buy a plots of land throughout a city and erect your own cell towers - no, that would not work. You'll need to cut through swathes of bureaucratic red tape just to have your plan considered. In other words, if you are not already one of the major telecom providers you will not be able to get into this industry.
These strict and extensive regulations on who can do what with telecom severely limit new business and new ideas from taking root, and even though you can buy mobile phone service from providers other than AT&T or Verizon, these lower tier providers are leasing bandwidth from either AT&T or Verizon - so in essence, they are simply reselling access to the same telecom resources and are thus limited in how flexible they can be with their prices.
“Then they pop up and say ‘Hello, surprise! Give us your money or we will shut you down!' Screw them. Seriously, screw them. You can quote me on that.” -- Newegg Chief Legal Officer Lee Cheng referencing patent trolls
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