August 13, 2003

Yes! Telecom Price Wars!

To us economists, prices ought to be signals of social scarcity. We overbuilt fiber-optic networks, we have ample wireless bandwidth, and so telecom capacity is definitely not scarce. So it should fall through the floor -- and it is.

WSJ.com - European Telecom Firms Face Price War From 3G Cellphones: ...Such a [European] price war could mirror the continuing brutal competition in the U.S., where wireless carriers continue to give away bigger and bigger buckets of minutes. The U.S. battle -- which preceded the upgrade to so-called 2.5G or 3G technologies -- has resulted in plummeting prices. A wireless minute now costs less than half what it did barely three years ago. While the growth in customers who have gone completely wireless has hurt local phone companies such as Verizon Communications Inc. and BellSouth Corp., the biggest impact has been on long-distance operators: Wireless minutes in the U.S. are generally the same price whether they are for local calls or long-distance calls, and customers with unlimited calling at night and on weekends, in effect have free, unmetered long-distance service. These developments have been punishing for the likes of AT&T Corp., Sprint Corp. and MCI...

Such price wars are a very good thing for the economy: they allow everybody to shift their activity patterns to use more of what is not a scarce resource, and to find new uses for our ample telecom capacity.

Posted by DeLong at August 13, 2003 12:29 AM | TrackBack

Comments

posted here approx. 6 hrs ago. posting again because your post doesn't show usually leads to double posting. will my earlier post show now?

Posted by: Mats on August 13, 2003 11:04 AM

it didn't :(

Posted by: Mats on August 13, 2003 11:13 AM
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