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How T-Mobile's pricing is pushing AT&T and Verizon in a race to the bottom

Glenn Fleishman | Aug. 17, 2015
Remember back in 2011 when AT&T said it needed to acquire T-Mobile in order to remain competitive against Verizon? That it couldn't get enough spectrum for 4G LTE without the merger? Oh, I never laughed so hard--and neither did the U.S. government.

Here's why: Carriers have already sunk a lot of expense into 4G LTE network upgrades (including purchasing spectrum licenses), and now the biggest portions of these costs have been paid. Yes, the carriers still invest hugely each year in maintenance and expansion. But their network infrastructures have been largely built out, and their current costs won't increase much with additional customers or data usage.

The upshot is that the carriers can significantly increase revenue by adding more customers. And to win those extra customers, they'll offer sweeter and sweeter deals.

As long as T-Mobile continues to acquire customers and makes a profit (or at least keeps losses small), AT&T and Verizon can't ignore what used to be a pesky ankle biter, and now is punching well above its weight.

 

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