Wireless Carriers Quietly Admit New 'Price War' With T-Mobile Doesn't Really Exist
from the sorta-kinda-competition dept
A lot has been made about the wireless industry’s recent bout with price competition, most of it courtesy of T-Mobile. Through a number of more consumer-friendly programs ranging from the elimination of device subsidies to offering free international data, T-Mobile has started finally getting larger carriers like AT&T and Verizon to respond ever-so-slightly on price (not without ample hand wringing and consternation of investors). With CEO John Legere mocking companies like AT&T almost every day on Twitter, the overall narrative is that the wireless industry is seeing an intense, fresh burst of competitive energy and that consumers are reaping the rewards through cost savings, right? Not so much.
In reality, prices steadily continue to go up as carriers cut prices on some services, but raise prices elsewhere or redesign pricing entirely to recoup any losses. While you might now save money on voice and text under AT&T and Verizon’s new shared data plans, for example, you’ll now pay more money for data and to simply connect your phone to the network. While you’ll no longer pay a subsidy on your phone or sign a contract, you might wind up paying more for one of the carriers’ new handset early upgrade programs or get dinged by a random new fee. That’s not to say that a lot of what T-Mobile is doing competitively doesn’t benefit users, but price competition is still intentionally being kept to a minimum by all parties involved in contrast to the press narrative.
As such, it’s amusing to see T-Mobile’s CEO busily playing rock star and professing to love cutting prices, while the company’s CFO quietly admits they’re not actually interested in a price war:
“T-Mobile raised the cost of its core unlimited data plan on Friday. The carrier says it has been competing more effectively by doing away with subscriber “pain points” like service contracts and international data fees. But its executives have also been signaling that they don’t plan 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,” (T-Mobile) Chief Financial Officer Braxton Carter said at a Morgan Stanley conference last week.”
And Verizon, despite T-Mobile’s supposed waves in the sector, similarly admits they’re not really seeing things all that differently:
“I think it is interesting given my years in the industry, how you hear things like price war and all that being kicked around in the media today and this is really nothing different than we have seen over the last couple of decades,” Verizon Chief Executive Lowell McAdam said on a conference call last month.”
That’s not too surprising, as Verizon has a vested interest in assuring stockholders things are fine, and they’ve long argued their superior network is ample justification to refuse to compete on price. In contrast, T-Mobile wants investors to see the company as disruptive, but investors also know that a price war will greatly hamper efforts to improve T-Mobile’s greatest weakness: much smaller overall network coverage.
Still, the fact companies are allowed to pick and choose when they actually get to engage in a price war is pretty telling about the state of competition in wireless. Despite the ample press coverage T-Mobile is generating, AT&T and Verizon together control about two-thirds of the retail market (and the resulting profits), they’ve cornered most of the available spectrum, and they control roughly 80% the “special access” market (they lease point to point connections that power all other services). Carriers have enjoyed some absolutely amazing profit margins on wireless for years (SMS, which costs carriers virtually nothing to provide, being just one example), and absolutely nobody wants to kill the cash cow.