CEO Math: AT&T’s Chief Executive Says Wireless Prices Have Decreased by 50%

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“History tells you that prices in this industry have come down for 10 years. In the last 10 years, there’s been a significant number of business combinations in this industry, and prices have come down by 50%. And prices continue to come down.”

These are the words of AT&T CEO Randall Stephenson, in an interview with USA Today, responding to a question about the possibility of price increases once the company’s merger with T-Mobile is finalized.

But have wireless prices actually come down over the last ten years?

Well, if they have, the average customer isn’t paying less.

According to the International Association for the Wireless Telecommunications Industry, here are some average wireless customer’s monthly bills for a few sample years:

1995: $51

1998: $39.43

2004: $50.64

2008: $50.07

In association’s latest survey, the average wireless bill was $47.21.

How can Stephenson claim prices have come down 50% in the last decade? I suppose by factoring in inflation, along with the fact that people use their phones far more often, and in different ways, than they have in the past. So when you look at this in a cost-per-minute way, consumers are certainly paying less than they were. In 2008, for example, the average wireless customer used his cell phone for 708 minutes, whereas in 2001 the average was 320 minutes.

[UPDATE: AT&T reached out to me to clarify that the source of its CEO’s claims is the Government Accountability Office. Indeed, last summer, a study reported prices for wireless subscribers were approximately 50% less in 2009 than they were in 1999. How does this jibe with the industry association figures showing that actual prices paid by subscribers have basically remained flat? It doesn’t. In any event, AT&T says it’s not the one making the 50% decrease claim — it’s the GAO.

AT&T has pointed out the 50% decrease to help make the argument that all the consolidation in the wireless industry over the past decade has been good for consumers, and that its takeover of T-Mobile will also be good for consumers. But, as a CJR post states:

“Correlation does not equal causation. Just because cellphone plan prices have fallen by half doesn’t mean industry consolidation caused the price declines. Nor does it tell us whether prices would have fallen more if there had been less consolidation. And anyway, consolidation from seven to five, say, is different than going to three or two.”]

While the technology has gotten cheap and increasingly offers consumers more for less, the typical consumer isn’t paying all that much less. Stephenson has to know that the average iPhone user pays around $100 a month. And sure, you get more with a smartphone, but let’s not pretend that the average consumer is somehow paying half of what he used to for service—because the numbers say otherwise.

Also interesting from that USA Today Q&A: AT&T’s CEO takes a swipe at pay TV. While the cable folks say there’s not much to the cord-cutting trend, Stephenson sees more and more people getting rid of pay TV:

There’s a demographic today that says, ‘We don’t need a subscription pay-TV service.’

I think that market will grow over time.

I think so too. I also think there’s a demographic that will grow sick of $100 monthly wireless bills.

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