Surprise! Cell Phone Monopoly
In a funny and provocative blog post, Slate economics writer Matthew Yglesias points to the frustration many customers feel with their monopolistic mobile phone carriers (namely, Verizon and AT&T). Yglesias argues that when he updated to the new iPhone 5S, or whenever anyone updates their Verizon or AT&T plan, the two mobile giants, apropos of nothing, charge a $30 fee (for Verizon; AT&T’s fee is $36). Yglesias points out that this fee is not in exchange for a particular service; it does not cost Verizon anything to “upgrade” a user’s phone. In fact, whenever a user signs a two year contract, she pays the carrier a very hefty price, well above the $400 or so that she saves in not buying a new iPhone from Apple outright. Yglesias points to heavy industry lobbying and formidable barriers to competition (“You can’t just wake up one morning and decide to start a new nationwide mobile phone operator”) as two big reasons these unreasonable and monopolistic costs are imposed on consumers, and suggests either heavy governmental intervention to make this market more competitive, or for already established carriers (i.e. T-mobile, Sprint) to step up their game and lower their price to be more competitive.
