Not only is there no evidence of carrier collusion in the U.S. market, the idea doesn't even make logical sense. Cartels are inherently unstable.[1] Participants only have an incentive to continue colluding when everyone is making money. T-Mobile is barely breaking even, and Sprint is actively losing money. It's absurd to argue they are colluding to protect a status quo they don't benefit from.
T-Mobile and other wireless carries barely break even in the same sense that Amazon barely breaks even - They are reinvesting most of their profits to increase their profitability in the future. T-Mobile actually has one of the highest gross profit margins in the sector, along with Verizon[1]. Their net profit is indeed low, but again, mostly due to continually investing in infrastructure upgrades and spectrum purchases.
I don't think these types of businesses will ever be inherently extremely profitable, but Verizon was making a nice chunk of change from ~2009-2014 until T-Mobile basically defected from the dominate market pricing contract scheme.
And of course, in America there would never be such a thing as carrier collusion, that's totally unthinkable, so what those carriers in Europe were up to would not at all be done on other continents.
T-Mobile and Sprint might be evil companies, but what incentive do they have to collude to protect a status quo under which they don't make any money? You're not just accusing them of being "bad companies"--you're accusing them of being irrational.
In the case of TMUS and S, and any other publicly traded company the imperative is to maximize shareholder value. Sprint especially is on the ropes. Investors worry a lot about a bankruptcy in the next couple of years. It has every incentive to change the status quo, and is cutting rates across the board to bring in subscribers.
It's not irrational if T-Mobile and Sprint believe they can eventually turn a profit, and probably compress the margins of T and VZ due to greater competition.
Sprint hasn't invested in its network in part due to cost-cutting. All of the carriers have to market. They are retail consumer facing.
I am not saying we should feel sorry for them, merely that the likelihood of collusion from Sprint especially is very low.
On the contrary, it would seem that Sprint has more to gain from collusion in such a situation because it allows them to use their network for bigger margins even if they don't upgrade.
See, there is no downside to collusion for parties, only upside.
And it even 'maximizes shareholder value'.
Sprint cutting their rates is a bit like pissing in your pants, as the Finnish say, it will only keep you warm for so long.
In the meantime, all carriers not being created equal, there may be some re-shuffling of name-tags and call signs but as long as carriers can get away with charging for thin air (SMS, Air Time) they've always done so, I see absolutely no reason to assume goodwill on their part without some pretty strict oversight.
And of course they have to market, just like everybody else that wishes to sell a product. But just like everybody else that wishes to sell a product, if there is no margin there will be no marketing, and if there is a way to improve the margin then surely it will taken.
Maybe Sprint is the exception, and they are really doing as bad as you say (a bankruptcy in the next couple of years does not sound like a huge threat to me, usually a bankruptcy in the next 3 months is the kind of thing you'd worry about) then maybe Sprint will go under and its assets and subscribers will end up with one of the other parties.
Such is the nature of doing business. But that says absolutely nothing about whether or not there is a profit to be made for all players by placing caps on data plans and by colluding to keep prices for data plans artificially high.
> See, there is no downside to collusion for parties, only upside.
The downside is that collusion preserves market share status quo. For those hoping to gain market share (like Sprint and T-Mobile) collusion gets in the way of that goal.
You're missing the point. You are presuming the market is functioning, my point is that if it does not the only losers will be the consumers all else being equal.
It is perfectly possible to compete for market share while at the same time colluding on the price of a part of your offering. All the parties competing will come out ahead in that scheme at the expense of the consumers.
You can compete on the kind of handsets you offer, your marketing message and the various demographic selectors. You can compete on coverage of the market, availability of the service, quality and so on.
He's not. Economic theory tells us that in a market with multiple competitors, collusion is inherently unstable: while in the short run companies may be able to keep it up, in the long run there is a strong incentive to break the collusive pact because whichever company does so will rapidly gain market share at the expense of the others.
Your argument to the contrary is based on piling speculation on top of speculation. Not only are we to assume--without evidence--that the carriers are colluding, we must also ignore what we know about T-Mobile's and Sprint's incentives to break the collusion and grab market share because they are, in fact, making tons of money but hiding it through clever accounting.
It's not that collusion isn't a possibility in cellular markets in the abstract. It's that it's highly unlikely in a market where one of the alleged colluders is bleeding money and customers and faces bankruptcy.
You mean: 'without evidence that I'm willing to consider about these specific competitors in this particular market'. But you are willfully ignoring the evidence from all the other competitors in all the other markets doing exactly that.
In other words: you are establishing that the competition must be efficient in spite of the fact that the prices for data transfer in your neck of the woods happen to be the same as they are in areas where carriers have already been established to collude.
Now I'm really happy that that is the standard that you'd apply to find say a defendant guilty in some court of law, but this is not a court of law and circumstantial evidence is fine by me in the case of multinationals that refuse to open their books to the point where one could establish whether or not their margins are artificially inflated or arrived at in ways that are not kosher.
But, since you seem to be very much of the opinion that carriers are entities that deserve a lot of sympathy for their present day miserable situation (rather than that they offer vast amounts of money for spectrum and then overcharge consumers in order to make this money back) I hope you will decide to strike out for the underdog here and to offer your carrier an even larger premium than they are already extracting from you for the data that you use.
I find it interesting that you begin the whole discussion on a note of 'everybody will charge what they will' with Apple as the example (of clear graft) and end on the present one, the cognitive dissonance is so strong that I really wonder how carriers have managed to pull the wool so thoroughly over your eyes that you can't see what's going on. You have to commend them for managing this, it's a long time since the break-up of Bell in the US and all the ugliness that has come to light in countries all over the world but to see it so successfully papered over that they could essentially get away with it in broad daylight is interesting to me.
If there is one aspect of technology that is rotten to the core when it comes to extracting money for nothing from the populace it is telcos and the industry requires very careful monitoring and the occasional government intervention to stop them from their worst excesses. Any and all appearance to the contrary may safely be interpreted as successful marketing.
Note that since it requires a license to operate the market is far from efficient in the present and that in quite a few countries with so-called free markets when it comes to telecom the various governments still have a large chunk (if not an outright absolute majority) of stock in their former monopolist telcos. And that this is one reason why governments do not feel all that motivated to do something about this problem.
Yeah, and they actually aren't dropping all that much. T-Mobile's prices have gone up the past year or two for new single/two person accounts with the same amount of data. Family prices seem to have dropped slightly but not very much. Sprint's situation is similar.
> And you're assuming that T-Mobile and Sprint are incapable of hiring accountants capable of minimizing their profits for tax reasons.
I'm assuming their accountants aren't any better than AT&T's and Verizon's, which show substantial profits from wireless.
> Let's turn this around: if the market is so thin why are they still pursuing it?
To get a bigger piece of a large market and hopefully profit in the future, just like 90% of the companies we talk about here on HN. But that's precisely why they have no incentive to collude to maintain the status quo.
You are aware of the fact that 'To get a bigger piece of a large market and hopefully profit in the future' means that they are actually choosing not to profit today but to reinvest their profits?
This is a common strategy in a growth market, such as mobile. And of course they have every incentive to collude because it would increase substantially those profits that they can then re-invest.
In other words, there is no downside to such collusion, and lack of profits in the present does not count as evidence given that in other markets such collusion has already been widely documented.
Chances are they are just terrible companies or you're falling victim the infinite leeway public companies have in presenting their financials, certainly in regards to their various "divisions". You're basically trying to argue "cheap information exchange is impossible" on the basis that USPS isn't turning a profit.
[1] https://en.wikipedia.org/wiki/Cartel#Long-term_unsustainabil...