Oligopoly Market Structure: US Telecommunication Industry-Mobile Services Subsector
The telecommunication industry in the United States is huge and incorporates several industries including providers of fixed lines, wireless lines, and internet providers, as well as, the manufacturers of telecommunication equipment. The focus of this paper will be on players in the wireless lines industry. The industry has experienced impressive growth from the advent of mobile phones and has continued to grow exponentially since the evolution of smartphones. Mobile phones have become a part of the American population with consumers looking at their gadgets, at least 9 billion times a day. The smartphone sales continue to grow even among Americans who are above 45 years. The growth in smartphone usage presents continuing opportunity for the wireless carriers, sub-sector in the telecommunication industry. Nonetheless, a few players dominate the mobile sub-sector, such that it exhibits features of the oligopoly market structure. T-Mobile, Sprint Corporation, Verizon Wireless and AT&T Mobility control almost 89% of the mobile telephone service market. AT&T Mobility is the main player with a consumer base of 192 million in the U.S. (Czarnecki & Dietze, 2017).
The fact that a few large firms dominate the market indicates the oligopolistic nature of the market in an economy with more than 200 million people. This is considering the hefty government licenses, the massive capital outlay to put in place the right infrastructure, as well as, investment on research and development. Legislation and government regulation of mobile service providers have restrained the number of operators in the sub-sector. Decisions taken by one firm, such as T-Mobile tend to influence decision making in the other three major players. The four players have continued to report huge profits since the high barriers of entry prevent new players from entering into the sub-sector to increase competition and reduce profits. The players in the sub-sector have been setting the prices as opposed to other industries that are perfectly competitive (Ouyang & Hu, 2017).
The growth of revenue for the year 2018 remains one of the key objectives of the wireless operators. Even though the consumption of data has gone up, the average return for data services has decreased as many consumers pay standard fees monthly or yearly. To keep the revenues constant or increasing, mobile operators have to identify new avenues they can exploit such as partnerships across the industry.
Carriers should continue to pay attention to offering data and voice services that are high quality, dependable, and reasonably priced. The capital allocation will continue being the main challenge and key focus. There is a need for the top players in the sector to make significant upgrades on their crucial connectivity infrastructure as the firms prepare to shift from the 4G to the fifth-generation platform. Besides the investment, there is also huge capital outlay on areas such as internet of things, self-driving vehicles, expansion into untapped market verticals in the industry, and mergers and acquisitions. Given the huge capital resources needed to survive in the Subsector and the desire to optimize on investments, the firms will require clearly articulated plans and an effective approach to capital expenditure. To remain competitive in the sub-sector, the top four firms must enhance their operations to improve service delivery (Czarnecki & Dietze, 2017).
A major concern is the continued reliance on manual processes by the telecoms. Nonetheless, cutting-edge technologies and innovations as recorded in 2018 may mark a shift to digital operations. Sales, billing, and customer care remain areas in which full digitalization will significantly improve service delivery. For instance, the four big players in the wireless Subsector rely on the call center to serve customers and handle issues affecting consumers. Use of the internet, especially social media would make service delivery easier and more convenient since many customers can interact with the customer service attendants through social media. Growth in the subsector is also tied to the speed in which the players will upgrade their infrastructure to match the high demand for data, since data usage has been a key revenue stream and adoption of 5G technology would further increase revenue (Ouyang & Hu, 2017).
A great percentage of the carrier’s revenue comes from core connectivity and all players will closely monitor the trends in connectivity in the future. Currently, the players have conducted successful 5G trials in various areas they enjoy huge customer base. Moreover, mobile operators have applied innovative technology to streamline their networks and offer enhanced and more services to consumers. For example, laying of additional fiber technology, densification of networks to serve more customers, as well as, refining spectrum effectiveness. Lastly, the firms have already laid out processes that have seen them reduce their use of exclusive, hardware-based network equipment to software-based network functions. The shift should permit them to manage their networks more resourcefully and efficiently, and it will also make them more responsive to changes in consumer preferences (Czarnecki & Dietze, 2017).
Massive changes are expected in the industry from 2018 as the 5G network becomes a reality. Even before the 5G technology is properly defined, mobile operators have already carried out successful trials on various markets in a bid to remain competitive in the fiercely competitive sub-sector. The 5G technology promises less latency, higher speeds, and greater efficiency that are the core factors for supporting connectivity and maintaining a sizeable consumer base. By the year 2020, the 5G technology will be operational for the mass market (Ouyang & Hu, 2017).
Majority of smartphones used by consumers in the American mobile industry will have inbuilt neural network machine learning capacity designed through innovative technology that can imitate how a human brain operates. This is of great significance because it can permit smartphones to undertake highly sophisticated roles such as finding directions, better reality, and recognition of speeches. They are designed to even learn daily tasks and preferences undertaken by an individual such that assistant apps installed in the phones such as Alexa and Siri become more practical (Ouyang & Hu, 2017).
Of particular interest and consideration in the industry are the issues of privacy and security. Every day, the industry players have to address security issues but there are still several issues that need to be streamlined since a majority of the customers still raise issues concerning their security when using mobile networks. In many instances, consumers have a perception that the mobile network is not safe, yet the mobile operator has invested heavily in securing the network. There is also the issue of call tapping by national security agencies to detect terror activities that have raised serious ethical issues and threatens the regular use of mobile networks. This would in turn adversely affect revenue for the key players. The rise of small players especially internet providers will be a focus of the top players as they endeavor to maintain market share and profitability (Ouyang & Hu, 2017).
Czarnecki, C & Dietze, C. (2017). Reference Architecture for the Telecommunications Industry. Springer International Publishing. Retrieved from file:///C:/Users/User/Downloads/9783319467559-c2.pdf
Ouyang, Y., & Hu, M. (2017). Big data applications in the telecommunications industry. Hershey; IGI Global.
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