The United States is home to a wireless carrier oligopoly
Introduction
The United States is home to a wireless carrier oligopoly that features four leading players: T-Mobile, Verizon, AT&T, and Sprint Nextel. Some sources indicate that the four companies together command a market share as high as 98% (Investopedia, 2020). This analysis will focus on T-Mobile. The following are some of the preexisting conditions for a single company.
- The ability to influence prices and other critical decisions made by the other significant participants – That includes the tendency to cheat on output and other agreements
- Government regulation restricting the company from merging with others and blocking potential market entrants. From the year 2018, T-Mobile has been trying to merge with Sprint, but the government persistently restricted the partnership.
- Competition with other vital participants – T-Mobile strived to retain customer satisfaction to maintain a significant market share.
- A market leader in 5G technology to keep its products ahead of the others.
The Differentiation
T-Mobile’s differentiation strategy involves the identification of a smaller niche market that comprises of urban dwellers. The goal is to attune customer preferences to the product and service offerings. Some of the issues addressed include the products’ colour, early termination fees, and unlocked phones. The company has decided to allow customers to switch into the network with their unlocked phones, paid for their early termination fees, and offered pink as the theme colour (Shepard, 2019).
The Market Status Before and After Differentiation
Before differentiation, T-Mobile, as well as other players, did not have the freedom to set prices independently without losing business to the competitor. After differentiation, T-Mobile can choose prices more freely. Such a change implies that the equilibrium price tends to rise because participants have more freedom setting prices. Equity and efficiency, therefore, generally decline as consumers lose more to firms in the market. At the same time, differentiation involves an extra cost. Differentiation was insignificant at the moment since the T-Mobile-Sprint partnership will provide both participants with more power to increase prices without having to differentiate the product (Reardon & Cheng, 2020).
References
Investopedia. (2020). The Most Notable Oligopolies in the US. Retrieved 31 March 2020, from https://www.investopedia.com/ask/answers/010915/what-are-most-famous-cases-oligopolies.asp
Reardon, M., & Cheng, R. (2020). T-Mobile and Sprint are finally merging: What you need to know about the $26.5 billion deal. Retrieved 31 March 2020, from https://www.cnet.com/news/t-mobile-and-sprint-are-finally-merging-what-you-need-to-know-about-the-26-5-billion-deal/
Shepard, B. (2019). 10 Companies That Brilliantly Differentiated Themselves From the Competition. Retrieved 31 March 2020, from https://blog.hubspot.com/insiders/branding-differentiation