An oligopoly is a state of competition where the market is dominated by a few large firms/sellers and is relatively hard to enter. One example of an oligopoly that we all are very familiar with is phone carriers.
We all know the main carriers which are Verizon, AT&T, Sprint, and T-Mobile. They currently dominate the phone carrier markets since they own a combined 98.61% share of the market. Since an oligopoly usually means that it is very competitive between all the players in the market, there is no surprise with the variety of ways each carrier has tried to get an upper hand on one another. One way is just to try to absorb other carriers to grow their own business. Examples are AT&T which absorbed Leap Wireless, T-Mobile took in MetroPCS, and Japan's Softbank bought Sprint.
This leads to the customers being stuck in phone contracts that benefit the carriers more than themselves. They charge large prices for any overages or things that are simply out of your control. Thus customers are forced to accept these unfair costs and contracts from the big companies such as Verizon and AT&T simply because the alternatives would result in a lesser cell coverage or anything that would make it harder to use your phone.
T-Mobile, being the smallest, has tried to set themselves apart from others using their "Un-carrier" strategy which essentially gets rid of many annoying things that other main carriers have such as roaming charges for international carriers and getting rid of contracts. They are committed to continuing to doing many other things that may attract more customers to them. One example is AT&T and T-Mobile willing to pay their opponents' customers to join them instead. In the past, AT&T has tried to absorb T-Mobile but was stopped by the antitrust division in the United States in 2011.
Works Cited:
https://www.alternet.org/economy/how-big-cell-phone-companies-are-getting-away-ripping-you-each-month
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Another reason that telecommunication companies like AT&T and Verizon are acquiring so many companies is because the telecom industry is not as profitable as it used to be. Because these companies already control huge swathes of the market, there isn't much room for growth in the telecom industry. But these companies still have to make money, so they turn to other industries. This explains why AT&T, a service provider, has purchased Time Warner, a cable company, or why Verizon, also a service provider, has purchased Yahoo.
ReplyDeleteI really enjoyed this post and I think it provides for good insight on how these carriers have control over the customers. The carriers you listed are really the only options that people have so we are forced to pay high prices, and cannot switch to a considerably cheaper option. I did not know about T-mobile and the things that they have done to try to make things easier on the consumer. Due to the fact that they have gotten rid of contracts, and certain fees, I am left curious as to how they make up for the money that they lose through this. Does T-Mobile have a higher base price, or are they truly the best option out there? Overall, I think this article did a great job about presenting information about the cell phone carries that we are all so familiar with.
ReplyDeleteI think this is a great post, Brandon. I have noticed myself that these phone companies have worked together to make better deals for them and force consumers into paying extra money. It feels like although they say they are competitive with each other, they are all working together. As shown through using the same actor in their commercials to literally combining companies and creating shared deals, I think your post does a great job of bringing up this obvious oligopoly.
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