As Richard Miller once said, “ It’s called an oligopoly. It’s not a regular market its a market in which they control the prices and they’ve been doing it for years.” what is an ‘oligopoly?, someone may ask. Well according to the article oligopoly, oligopoly is a market structure with small number of firms, none of which can keep the others from having significant influence. In an oligopoly industry there is not an exact number of upper firms, but the number has to be low enough so that the action of just one firm can’t have a significant influence on the other firms. Some examples of oligopoly are airline industries, entertainment industries, and cellular phone services. In this essay we will mainly focus on cellular phone services, but we’ll specifically focus on T-Mobile. The readers will have a good understanding on why cellular phone services and specifically T-Mobile phone services fit the model of oligopoly; the interdependence between T-Mobile phone services and the other phone services, and the ways that T-Mobile phone services has attempted to remain profitable and the challenges that it routinely faces.
In her article “Is T-Mobile hiding America’s best value plan?”, Tara Donnelly stated that “T-Mobile is one the “Big Four” cell phone carriers in the United States, a key player in the wireless mark”. T-Mobile over the years has proven to be one of the top competitors in telecommunications industry. Compared to the past telephone services companies price have changed significantly, as cell phones became popular so did providers such as Sprint, T-Mobile, Verizon and AT&T. With all these big providers comes competition they try and compete for the best plans, in article “How the Sprint and T-Mobile merger could impact consumers”, Meghan Kenneally stated that, “If you look at the market, you’d see every time T-Mobile cuts its price, Sprint cuts its price to match”. This means they never let another firm price differ from the other and by doing so they can remove any price leadership, also they invest a lot of money into marketing campaigns so that they can stand out amongst the other competitors (this is considered non-price competition), meaning they use other methods like creativity to bring in customers. The way T-Mobile is an oligopoly is because it competes with the other three providers, such as Sprint, Verizon and AT&T and each of them affect one another. Since all these firms are similar in the fact that they offer the same phones and plans/prices it all really comes down for the customer to consider other factors such as services at the stores, advertisements (commercials), and the hours that the firm offers in store and out of store (online customer services). This all comes together to make each firm benefit as well as the customers, the firms keep prices at an average rate so that it is not to be considered a monopoly and not low enough to be considered a perfect competition, having the middle ground brings high income and as stated before makes it beneficial all around.
In his article 4G LTE/ 3G cellular data speed comparison: AT&T vs. Verizon Wireless vs. Sprint vs. T-mobile; Victor H. stated that “ T-Mobile is the fastest 4G network in the United States scoring first in 20 out of 20 mejor metros that we measure.” T-Mobile has managed to improve its network quickly, and it is now the fastest network. Based on the graph below it clearly shows how T-mobile is the leading service provider surpassing Verizon, AT&T and Sprint. Since 80 percent of the cellular telephone service market is controlled by T-Mobile, AT&T, Verizon, and Sprint ; T-Mobile has to make sure that it is always providing its users with the fastest high speed data, so that the people will always be willing to get T-Mobile as their service provider. For example, i’ve had the T-Mobile phone service for over five years and I can say that personally I think that it provides the best service. Never once did I have any problems with my service and I can see why T-Mobile is the leading phone service provider.
The chart below is the annual survey of wireless customer service satisfaction from customer reports. This chart is a clear demonstration of the interdependence between T-Mobile and the other three cell phone service providers in terms of product differentiation . The first part of the chart is the reader’s score for all four of the service provider. The chart shows that Verizon has the highest readers score and T-Mobile come in second place. In terms of customer support T-Mobile had the highest score for the phones that they provide. Being that T-Mobile falls in the oligopoly industry it has to make sure that it’s always offering the best service from the rest of the cellular providers, because the consumers will always keep on coming back and they will never have the need to go out of business.
In the chart below we are able to see the price competition between T-Mobile and the other three mobile service providers. The chart is how T-Mobile unlimited plan prices compare to other providers, as we can see from the cart T-Mobile provides the best plan services. The price of one line for T-mobile is between $70-80 monthly; two lines $120-140 monthly; three lines $140-170 monthly; and four lines $160-200 monthly. T-Mobile provides the cheapest and most affordable plans. If T-Mobile wants to continue leading the cell phone service provider, then they have to continue doing what they are doing because they are the best in the market. People are always looking for good deals and since T-Mobile seems to be the one that is providing the best deals, then more people will definitely be willing to get T-Mobile as their service provider.
T-Mobile has had exponential growth, being consider the third largest in the industry. With being one of top industries comes good and bad, T-Mobile has been able to make profit and deal with their challenges all while remaining at the top. One of the challenges they have dealt with is when their unlimited plans caused monthly ARPU issues putting strains on their revenues however, they found a solution by increasing prices just enough to put them alongside other competitors and this is how they also have remained profitable while solving challenges. According to “Forbes what lies ahead for T-mobile 2018”, T-Mobile will continue to grow by being involved in the TV industry, this will bring improvement to stickiness and lower churn rates. With the path that T-Mobile is going it should continue to see growth and stay as one the top competitors while remaining in an oligopoly state. Although AT&T and Verizon are T-Mobile’s biggest competition they have shown the capability of providing for customers with offering good values and family plans, their method is to be aggressive on pricing but maintain an increase in scale. T-Mobiles goal is to continue to have loyal customers and not just being about quantity but rather quality service, as well as to stand out from their competitors with great prices/ plans, but also come up with innovative ways to be a leading carrier.
In conclusion, oligopoly is a state of limited competition, in which a market is shared by a small number of producers or sellers. Some examples of oligopoly are airline industries, entertainment industries, and cellular phone services. We decided to focus on cellular phone services and we mainly focused on T-Mobile service provider. It’s important for T-Mobile to be considered an oligopoly because it allows for the firm to grow alongside its other competitors and compete. Each firm plays an important role in oligopoly because it would be in the best interest not only for the firms but also to the markets. We also took a look at the interdependence between TMobile and the other cellular phone service providers in terms of product differentiation, price leadership, and price competition. In order for T-Mobile to continue to profit and be considered the best phone service provider, they have to make sure that they are providing the best prices and that their products are unique from other phone service providers. In the cellular phone service provider T-Mobile is the leading service provider because it offers more affordable plans then the other companies. Continuing down this path will allow T-Mobile to be a firm many would like to be a part of while remaining oligopoly and having a significant influence in the telecommunications industry.
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