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Wireless price war's good for consumers, but challenges carriers

Matt Hamblen | Oct. 27, 2014
Profits are in doubt at big carriers, posing concerns about long-term network, spectrum investments.

Gold said the situation among big wireless carriers in the U.S. is "really about survival of the fittest." Even though consumers may feel a deal on a service or product offer is important to grab, Gold warned: "Aggressive competition, if it gets too aggressive and unchecked, ultimately results in fewer competitors longer term, leading to rising prices and less choice. Consolidating markets are not always good for the consumer, but often good for the vendors."

Bill Menezes, an analyst at Gartner, said the long-term effect of today's price and contract battles could lead carriers to reduce spending on long-term construction plans or even on buying up more wireless spectrum at auctions.

"If you are buying spectrum or improving network density, you need cashflow to do that," Menezes said. "Verizon has a big debt load since it bought Vodafone, and AT&T is looking to expand with a purchase of DirectTV."

Verizon last year was rumored to be interested in expanding its network into Canada, while AT&T has been rumored to be interested in buying up spectrum in Latin America, but instability with earnings could shelve growth plans, he added.

Whether their profits are really being hit, "the Q4 earnings reports will be the tell-all," Menezes said.

In the short term, wireless customers can benefit and leave the earnings headaches to the CFOs.

"Consumers should be happy when prices go down, although that might debilitate the ability of the service providers to give you a good experience." Entner said. "But that impact wouldn't happen until a couple of years. Until then, I'd say, enjoy it."

 

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