In the telecommunication industry there is not as much space for competition as for the hotel, restaurant or retail industries for example. In this industry the company-consumer relations are probably the most important thing and the major players have been working on it for many years now. This in addition to the high costs and even higher probabilities of not leveling up the already exiting companies is what strains a lot of competition to rise.
Because of this “lack of competition” there a few major service providers and they have to keep competitive prices at all times, because if not the costumers will just move to one of the other companies that offer the same service. This tendency of “sticking to competitive prices” results in a very small difference in prices for specific services. AT&T, for example offers for $39.99 a plan of 450 minutes (8.89 cents per minute) while T-Mobile has a 500 minutes plan(8.00 cents per minute) for the same price. As you can see the difference is of eight decimals of a cent making it almost insignificant. But as I sayd in the first paragraph the difference between companies in this industry is marked by the consumer relations, this companies probably have similar prices but each of them offer different promotions and offers to fit the needs of every consumer. Besides that, consumers also have their personal reviews of the different companies and many times they choose service quality over any other thing.
The recession of 2008-2009 has definitely created an impact on the balance sheet of the key players of the industry. Using the trends of AT&T Inc. and Verizon Communications Inc. as reference, the industry’s trend was rising since 2000 to precisely the middle of January of 2008 when the trend fell drastically until mid 2009. The graphs show that the trend has been recovering since then but it has not get to the point it was before the recession.
References:
Yahoo Finance: http://finance.yahoo.com/q/bc?t=5y&s=T&l=on&z=l&q=l&c=VZ
Thomson Reuters
Claudio Lacayo
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ReplyDeleteWhat is most interesting about competition in the telecommunications industry is the fact that it's difficult to maintain a unique product. It is difficult for one company to be the only producer of a certain product. For example, most recently, the idea of a personal tablet computer was unique to Apple Inc. This product was exclusive to Apple Inc. for only a short period of time. Now, there are numerous companies vying for sales by developing their own tablet computers. Tablet computers now have to be designed in various sizes and with various capabilities in order to distinguish the different companies in the market. This is also seen in the smartphone market.
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