Proof Wireless Carriers Would Rather Not Compete on Price

          For years, I have expressed an educated opinion that wireless carriers would rather not “devote sleepless afternoons competing.” While I may have reached the boundary line of snarkiness, which I try hard not to breach, the point stands: carriers can better enhance share prices, profit margins, and bonus likelihood if they implicitly agree not to sharpen their pencils too often. Consumers pay a higher price for service.

          I also have frequently stated that industry consolidation enhances the likelihood of a mutual non-compete pact.  Specifically, the acquisitions of Sprint and other wireless carriers have so concentrated the market that the triopoly of AT&T, Verizon, and TMoble now collectively share a 96% market share. See https://blog.telegeography.com/2025-mobile-market-summary.

          I predicted the TMobile’s acquisition of Sprint eventually would eliminate TMobile’s iconoclastic, market disrupter posture.  See, e.g., https://telefrieden.blogspot.com/2018_06_17_archive.html.  The Judge who approved the merger disagreed, confidently concluding that TMboble would never relinquish its “uncarrier” maverick character.  He anticipated a “company reinforced with a massive infusion of spectrum, capacity, capital, and other resources, and chomping to take on its new market peers and rivals in head-on competition.” See https://storage.courtlistener.com/recap/gov.uscourts.nysd.517350/gov.uscourts.nysd.517350.409.0.pdf; https://telefrieden.blogspot.com/2018_06_17_archive.html.

          I was not surprised to read that several industry analysts have consider TMobile as a go along, get along, no so innovative and aggressive competitor, having its uncarrier disposition.  See Monica Alleven, What happened to T-Mobile's ‘un-carrier’ edge?, Firece Network (May 6, 2025); https://www.fierce-network.com/wireless/what-happened-t-mobiles-un-carrier-edge.

          Only a coined operated, sponsored researcher can unconditionally assert that industry consolidation “enhances competition.” Mergers make it more likely that the remaining ventures engaged in what antitrust economists term conscious parallelism. Rather than compete on price, the wireless carriers offer roughly the same rates.

          Apparently, AT&T, TMobile, and Verizon have identical costs of doing business, so much so they become price takers.  Lacking any efficiency cost advantage, the carriers set prices based on what the other two offer.  The highest rates offered by one of the three carriers becomes an  cap.  The carriers’ rate fit snugly at or slightly below the umbrella cap.

          Less is More? No, less is less: less innovation, little price competition, and reduced consumer welfare.

 

 

         

 

 

 

           

 

Yet Again the Editorial Board of The Wall Street Distorts Wireless Market Reality

          The Saturday Oct. 5^th 2024 edition of the Wall Street Journal falsely claims that wireless telecommunications rates in the U.S. have remained flat despite ravenous inflation: “Even as inflation has surged, wireless prices have remained flat since 2018.” https://www.wsj.com/opinion/dish-directv-fcc-charlie-ergen-jessica-rosenworcel-c50c31b4.

          Just because the Mandarins at the Wall Street Journal offer a definitive statement about something does not make it true.  With characteristic snark and righteous indignation, the Journal polemicists want to convince readers that the reduction from 4 to 3 facilities-based wireless carriers in the U.S. achieved great things for consumers and the overall competitive and innovative health of the industry.  Two prominent researchers claim that TMobile’s acquisition of Sprint singularly enhanced consumer welfare with no apparent downside.  See https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4736059.

          How do consumers allegedly benefit from further concentration of an already oligopolistic market?  It takes creative, selective, and flawed interpretations of statistical facts to pull that rabbit out of a hat.

          To show flat rates, one would have to ignore the widely used carrier tactic of sneaking in new billing line items, or increasing existing ones.  Researchers also would have to ignore clear evidence of actual rate increases by asserting that the average minutes of use and data consumption increased thereby offsetting higher out of pocket payments by subscribers. Additionally, researchers would have to ignore ample evidence that subscribers are being involuntarily migrated to higher costing rate plans.

          Here’s a credible, non-partisan assessment of wireless pricing compiled by the Bureau of Labor Statistics, available at: https://data.bls.gov/pdq/SurveyOutputServlet.  Look for 2018-present PPI Industry Data;

Series Id:	PCU517312517312
Series Title:	PPI industry data for Wireless telecommunications carriers, not seasonally adjusted
Industry:	Wireless telecommunications carriers
Product:	Wireless telecommunications carriers
Base Date:	199906

Does the line appear horizontal to you?

          There are plenty of credible reports that U.S. subscribers are paying more for wireless service and their monthly rates exceed what most subscribers pay throughout the world. See https://www.billshark.com/blogs/u-s-mobile-plans-expensive; https://www.tangoe.com/blog/prepare-for-higher-mobile-phone-bills-this-summer-att-others-are-raising-rates/; https://www.usatoday.com/story/money/2024/05/23/t-mobile-price-hike/73818353007/;https://www.cnet.com/tech/mobile/verizon-price-increase-why-your-phone-bill-might-be-higher-in-march/;https://www.zdnet.com/home-and-office/networking/t-mobile-is-raising-prices-on-several-cellular-plans-heres-how-much-and-when/.

          Consider this scenario.  Let’s assume a Law Vegas hotel dinner buffet is priced at $75.00 per person.  Such a deal, given the diversity of opulent menu options.  Too good to be true, because the rate increased to $100.00.  Consumers of Las Vegas hotel buffets would interpret the new $100 price as a 33.3% rate increase.  The hotel and their sponsored researchers would cast about for ways to explain that the “value proposition” of the buffet “experience” actually increased.  They determine that the average guest increased consumption of buffet items from 2 pounds to 3 pounds, despite the imposition of a 90-minute time limit!

          Here’s the mathematical proof. At the $75 price point the per pound rate of consumption amounted to $37.50 (75 divided by 2).  Despite the $25 rate increase, a 3 pound rate of consumption reduces the per pound rate to $33.33 (100 divided by 3). Apparently, the buffet deal got better, because the attributed measure of consumer welfare increased, despite the price hike.

          Such a deal.

          If wireless consumers increase their network consumption sufficiently, the Wall Street Journal Editorial Board and others can see this as proof positive that the market is robust, competitive, innovative, increasing investment, hiring more employees, and making every subscriber fat and happy.

         

 

 

 

 

 

 

 

         

Lies, Damn Lies, and Selective Statistics About Our Great Wireless Marketplace Thanks to the TMobile Acquisition of Sprint

             In the February 13^th edition of the Wall Street Journal, Professor Thomas W. Hazlett offers a breathless endorsement of market concentration with the TMobile acquisition of Sprint his go to example.  See https://www.wsj.com/articles/t-mobile-proves-that-mergers-can-benefit-consumers-8fab2890.  Apparently, mergers and acquisitions benefit consumers, because they enhance competition and generate all sorts of positive outcomes that could not possibly have occurred, but for the reduction in the number of industry players.

            Professor Hazlett has cherry picked statistics to create the false impression that mergers are the primary trigger for all events enhancing consumer welfare.  Conveniently, he ignores the benefits accruing from technological innovation, maturing markets, and the likelihood that just about all of his evidence would have occurred even if TMobile had not acquired Sprint.

             Do not be fooled into suspending disbelief and ignoring common sense.  Companies merge, because senior management believes industrial consolidation will enhance shareholder value, generate bonuses, and make it less essential to work sleepless afternoons, reduce operating margins, and enhance the value proposition of the goods and service offered.

            Here’s a reality check: consider whether and how TMobile continues to serve as the wireless marketplace maverick keen on innovating and distinguishing itself from the clueless market leaders AT&T and Verizon.  The judge approving the $26.5 billion acquisition of Sprint shared Professor Hazlett’s enthusiasm that a bolstered TMobile would have even greater capabilities and incentives to acquire market share and trounce the bigger incumbents:

 

[I]t is highly unlikely that New TMobile executives, upon the company being reinforced  nearer in size and resources to AT&T and Verizon, would do a commercial about-face and instead pursue anticompetitive strategies. State of New York et al v. Deutsche Telekom AG et al, No. 1:2019cv05434 - Document 409 at 160-61 (S.D.N.Y. 2020). available at: https://cases.justia.com/federal/district-courts/new-york/nysdce/1:2019cv05434/517350/409/0.pdf?ts=1581513636 … [T]estimony and documentary evidence revealed . . . a company reinforced with a massive infusion of spectrum, capacity, capital, and other resources, and chomping to take on its new market peers and rivals in head-on competition. Id. at 161

             Do you consider TMobile as operating with the competitive zeal anticipated by an approving court and attributed by Professor Hazlett?  Put another way, post-merger, what has TMobile offered to distinguish itself as the better of three options?

             TMobile has relaxed its maverick, competitive muscles making it possible for all three gigantic carriers to raise rates, well above the general inflation level.  TMobile matches, and in some instances, exceeds comparable options from AT&T and Verizon. https://www.lightreading.com/5g/t-mobile-s-premium-pricing-passes-at-t-verizon; https://ktla.com/news/money-smart/t-mobile-planning-to-move-customers-on-older-phone-plans-to-newer-ones/; https://www.cnn.com/2023/03/06/tech/verizon-plan-price-increase/index.html. The three carriers have nearly identical rates and differentiate primarily on what “free” video streaming service they bundle and how clever they can confuse consumers into assuming “on us” means a free handset.

             There’s an inconvenient fact that U.S. wireless subscribers pay some of the highest rates globally. See, e.g., https://communitytechnetwork.org/blog/why-is-the-internet-more-expensive-in-the-usa-than-in-other-countries/; https://kushnickbruce.medium.com/at-ts-wireless-profits-are-outrageous-at-t-s-5g-wireless-prepaid-prices-are-obscene-compared-dc15c57926f; https://themarkup.org/2020/09/03/cost-speed-of-mobile-data-by-country; https://www.quora.com/Why-are-phone-plans-in-the-US-so-expensive-compared-to-other-countries-not-hate/.

             Statistics do show a long-term reduction in cost based on increasing minutes of use and data consumption, i.e., the per voice minute or per megabyte of data price has dropped precipitously.  As markets evolve and carriers accrue greater economies of scale, prices should decline.  However, the rate of decline in the U.S. pales in comparison to that occurring just about everywhere else.  

             Recently, all three U.S. wireless carriers have raised, not further reduced rates.  See, e.g., https://www.cnn.com/2023/03/06/tech/verizon-plan-price-increase/index.html. TMobile triggered major pushback when it sought to eliminate service tiers and force an “upgrade” to something significantly more expensive. https://www.fiercewireless.com/wireless/t-mobile-will-migrate-customers-higher-cost-plans.

             I can find nothing about the T-Mobile acquisition of Sprint proving how mergers can benefit consumers.