by Karl Bode

Filed Under:
competition, mobile phones, prices, wireless


AT&T's Version Of Wireless Price Competition: Raising Prices

from the that's-not-how-this-works dept

There's no doubt that T-Mobile and its smack-talking CEO have been good for the wireless industry, applying pressure on a lot of customer pain points like subsidized devices, international roaming, and long-term contracts and early termination fees. As a result, T-Mobile's been adding more new subscribers than any of the other three major carriers. But as I've noted a few times now, the pricing response to this competition by companies like AT&T and Verizon has been a bit cosmetic and theatrical in nature, since none of the carriers want a real wireless price war.

Sure, there are some occasionally decent promotions but, by and large, the name of the game right now for both AT&T and Verizon is driving network usage and shoving customers as hard as possible toward large, expensive, shared data allotments. Verizon has pretty loudly stated it's not going to seriously compete on price because it believes its network is just that good. The latest example of not-really-price competition comes courtesy of AT&T, who is responding to T-Mobile's competitive pressure by... raising fees and creating entirely new annoying surcharges:
The new activation/upgrade fee for one and two-year agreements is raising from $40 to $45, which gives AT&T the highest activation fee in the industry (Verizon is still at $40 for now). Going forward after August 1, should you choose to sign-up for a new contract to receive a discounted phone, you will pay $5 more than you used to.

In related news, AT&T Next will no longer be a zero-out-of-pocket installment plan. Come August 1, customers who are new to AT&T Next will have to pay a $15 activation fee when they pick up a new phone. This $15 fee also applies to those who bring their own device (BYOD) and sign-up for a new line of service.
So yeah, AT&T's response to price competition is -- to raise prices. And its response to media inquiries so far as to why this is occurring has been total radio silence, since there's not much it could say to defend the practice. Perhaps that's the reason that while T-Mobile is seeing notable growth, AT&T actually lost phone customers last quarter?

There are still a few reasons why AT&T doesn't really have to care what you or the media thinks. One, the company's mammoth lobbying apparatus ensures it still gets favorable treatment, especially on the easily manhandled state level, where most legislators would happily sell their first born to win the company's affections. Two, AT&T still has a stranglehold over a huge swath of wireless spectrum thanks to auction rules that historically favored large companies (though that's changing... slowly). Three, AT&T and Verizon combined still control around 80% or more of the wireless backhaul special access market, which companies like T-Mobile need to pay to access in order to reach their customers.

Of course hammering customers with a bevy of annoying fees is pretty much standard operating procedure in most industries as a way to pretend your advertised rate is staying the same. But AT&T's latest greedy little cash grab is worth remembering the next time industry trade groups like the CTIA are breathlessly insisting that fierce competition is delivering a bonanza of broadband bargains. There is no "wireless price war." It's more of a theatrical pricing improvisational dance.

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  • icon
    Ninja (profile), 24 Jul 2015 @ 10:24am

    the CTIA are breathlessly insisting that fierce competition is delivering a bonanza of broadband bargains

    They are referring to the competition to be the worst company in America. So far Comcast seems to have a comfortable lead.

    reply to this | link to this | view in chronology ]

  • icon
    Eponymous Coward (profile), 24 Jul 2015 @ 10:57am

    Activation fees have always been BS

    I have activated my last 3 phones online with VZW. In each case, it's taken no more than 20 minutes, with Google handling the bulk of the process (transferring contacts and whatnot).

    The fact that a carrier can still get away with charging any amount of money for a couple minutes of menu navigation, entering a device ID, and restarting the phone boggles my mind.

    reply to this | link to this | view in chronology ]

  • icon
    DannyB (profile), 24 Jul 2015 @ 12:03pm

    I don't have a problem with raising prices

    In principle, I don't have a problem with raising prices.

    What I have a problem with is the lack of effective competition.

    With little to no competitors, there are no effective market forces to keep prices reasonable.

    reply to this | link to this | view in chronology ]

    • icon
      R.H. (profile), 24 Jul 2015 @ 5:38pm

      Re: I don't have a problem with raising prices

      I think the bigger issue is the fact that there should be competition in the wireless space. There are four major wireless providers in the US and many smaller MVNO's that operate on their networks. So, why don't we see any actual competition? This makes me both angry and confused.

      Unfortunately, I also can't think of a good way to fix this problem. Is there anything that the FCC (or the FTC if necessary) could reasonably do to push competition along?

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 25 Jul 2015 @ 12:24pm

    I never understood an activation fee... I pay you in order to be able to pay you more?

    reply to this | link to this | view in chronology ]

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