Jeremy Lynnes' Blog

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AT&T, Verizon – Price fixing, Signalling or just plain collusion?

They are price signalling which becomes awfully close to collusion. If they wanted competition you’d be seeing more value from one than the other, trying to get customers.

However, what IS happening is both companies are watching each other and RAISING costs to the consumer.

AT&T and Verizon hold massive market share (combined 68% and rising) and are reaching the point of market saturation. At this point you have two options:

1. Lower prices/increase value – creates competition and reason for consumers to jump from Company X to company Y.

2. Remove the risk of losing customers by giving them no reason to leave. If Company X and Company Y offer the same product, for the same price, why move?

AT&T and Verizon have gone with option #2. It reduces churn and allows them to increase revenue by raising prices. The top two wireless providers literally don’t care about competition at this point.

Why isn’t this collusion (yet)? AT&T made a bid they probably knew would fail to buy T-Mobile. There wasn’t a $3Billion gamble on the deal, AT&T was making an investment to make sure AT&T and Verizon didn’t look like an oligopoly. It’s probably the reason why T-Mobile is still without the iPhone (too much potential for competition). You’d have to be naive to think that AT&T doesn’t have their fingers in T-Mobile in some way.

I’m sorry, but if you believe companies working together is a good thing you’re either:

1. Working for or formerly employed by AT&T/VZW
2. Shareholder (after all, increased revenue & profits is a good thing for shareholders)
3. Completely naive
Info regarding market share and saturation:

http://www.nasdaq.com/article/earnings-preview-us-wireless-carriers-look-for-revenue-gains-and-market-share-20120712-00885)

http://www.statista.com/statistics/219720/market-share-of-wireless-carriers-in-the-us-by-subscriptions/

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