High Degree of Market Concentration Aboon or Threat to Consumers

AT&T cited the U.S. Consumer Prices Index to show that wireless prices have declined 50% since 1999. In that time, Bell Atlantic and GTE formed Verizon, SBC and Bell South formed Cingular, Sprint bought Nextel , AT&T bought Cingular, and Verizon bought Alltel. It’s true that the cost of voice services has fallen over the past decade, and even in the past year: Sprint and T-Mobile both offered attractive rates, so Verizon and AT&T slashed the prices of their unlimited calling plans by $30 in early 2010.

But what that doesn’t show is how much people are actually spending on their cell phone bills. For AT&T customers under contract, spending has gone up over the past four years. AT&T’s average revenue per user for postpaid customers has increased by about 3% in each of the past several years as data services have driven up users’ spending. That’s because customers with contracts are buying more smartphones and tablets.

AT&T’s revenue from accompanying data services is up a whopping 19.3% per user in 2010 and 23.7% in 2009. Customers are undeniably getting more for their money than they were in the past. Tablets and smartphones are a big leap forward, and it’s reasonable for customers to pay extra as their new gadgets suck up additional bandwidth.

But as data traffic increases, customers keep paying more for the data that they consume. AT&T’s data plans are competitive with its rivals, but several of them offer unlimited plans. AT&T doesn’t. It has put caps in place that slap heavy overage charges on additional usage. Plus, wireless carriers are quietly hiking the prices customers pay for their mobile phone service. AT&T claims that the cost per bit will come down as a result of its T-Mobile deal, but analysts