Alex Tabarrok links today to an op-ed in the Wall Street Journal which has some good news: the T-Mobile/Sprint merger in 2020 wasn't anti-competitive! But this paragraph piqued my curiosity:
Average monthly mobile subscription fees dropped sharply. In the three years before the merger, according to government price data, mobile charges declined in real terms by about 8%. In the three years following the merger, the real price decline has been nearly 12%.
"Three years" might not sound like anything special, but in fact it's very carefully cherry picked. The merger took place in April 2020, so three years before that is April 2017. And it turns out that right in the previous month the cost of wireless services dropped a bunch. This means that if you count from April, you miss the big decline.
This is very convenient since it produces the worst possible pre-merger baseline you can squeeze out of the data. If, instead, you compare the whole period after April 2020 with the same number of months before April 2020—a much more natural comparison—you get a price decline of 21% before the merger and 16% after:
The chart above makes this clear by giving you a long-term look. Wireless phone service costs have been declining for a long time, but they've been declining less since the T-Mobile merger with Sprint.
The moral of this story is: Never trust anything on the Wall Street Journal editorial page. There's always jiggery pokerey of some kind. Always. You just have to look.
NOTE FOR DATA NERDS: I know that, technically, this ought to be a log chart. However—oh hell, forget it. Here's the log chart:
It doesn't make much difference. But it does make the slowdown in price declines a little clearer.
AND ONE MORE THING: Causality is genuinely hard to demonstrate, and counterfactuals are tough too (how much would prices have declined if the merger hadn't taken place?). So this data doesn't say a lot about whether the merger should have been approved. But it does say that the merger (a) didn't lead to lower prices and (b) most likely led to higher prices.
I'm a believer in Daniel Davies' 1-minute MBA, and in this case, we can apply "fibbers forecasts are worthless". Tabarrok is known to argue in bad faith. Has been known for a long, long while. There's no need to take anything he says seriously. Sometimes he'll even come out with the truth. But that's b/c it's useful to his agenda, which is and always has been the defense of the rights of property.
That's all he is, that's all he's ever been. Probably, that's all he'll ever be.
Don't know about those graphs, but those shit heads at Verizon Wireless are increasing my monthly cost by about 10%. Maybe that is less than inflation, but I really don't care, and of course the equipment financing arrangement is locking me in for about another year.
used-to-be, that when the changed the contract terms, it meant that you had the option of opting out of the contract. I wonder if that's still the case, and if you get to keep the equipment or (haha) just return it used.
You own your cell phones, so you can cancel at anytime. Verizon gave us a $400 discount when my wife bought her Iphone 13, which is being used monthly to reduce the cost of the phones $1K list price. If you cancel before 24 months, the remaining balance on the phone is due, but the the remaining discount is lost. I really don't think there is that much discount left, so my main reason for not dumping Verizon now is pure laziness on my part.
I'm a T-mobile subscriber. We have Simple Choice for 4 phones and a watch, which costs $148 after taxes. The closest plan we could get right now if we weren't grandfathered in, Magenta, would be about $215 for the same service.
So, AFAICT, T-Mobile has raised rates about 50% in the last few years.
Note there are two bumps following the start of the pandemic. Knowing that y/y inflation was rising until peak in mid-summer 2022, this means those two bumps in your inflation-adjusted rates are actually increases in prices. And you can see it more clearly in the nominal wireless CPI y/y change.
Note that MVNOs haven't raised prices, so you know, you folks with Verizon and T-Mo are suckers.
So, how many wireless carriers were there in 2001, and how many remained in 2023?
I'm a wannabe nerd who struggles to read log charts even though they're obviously way better for graphs where you need to understand changes over multiple orders of magnitude.
This graph, however, isn't it. What makes log charts better for this data?
The study also ignored some good evidence that might have provided insight into the matter --- how did prices change for wireless service in other countries at the same time. If prices in those markets were declining more quickly than those i the US, it would support the idea that the merger had a negative effect on prices for the consumer.
Data pedant here.
Kevin, the trend line you draw will hit zero in about ten years, meaning that cell service will be free that year, and in subsequent years rates will be negative, with cell phone companies paying the customer rather than vice versa. This seems unlikely.
The trend line you should be using should show a constant percentage reduction every year. This would be a straight line when plotted on a log scale, unlike the trend line you use, which is curved when plotted on a log scale.
Using the correct trend line shows that the merger didn't have an obvious effect.
I don't now why they bother are the Wall Street Journal. Believing that a merger lowered prices is equivalent to believing in virgin birth.