Telecom Prices Are Up...and That's a Good Thing

Posted by: Michael Mandel on May 18

Buried deep in this morning’s CPI report from the BLS was the encouraging news that phone prices have been rising at a 2.1% rate over the past 3 months. That’s the biggest 3-month rise since early 2003.

This is good news for telecom companies, enabling them to boost revenues and profits (investors don’t believe this yet, though. Both Verizon and SBC are not much above their recent lows).

It also could be a sign that the communications sector is finally starting to capture a bigger share of the pie. As I wrote in a BW article (dated May 16, 2005), consumer spending on information-related products and services is a smaller share of consumer budgets than in 1997. An increase in spending would benefit the entire information sector—including hard hit telecom companies and content providers.

Related posts on the same subject come from James DeLong (yes, Brad’s father) and John Rutledge.


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Reader Comments

Jack Krupansky

May 18, 2005 12:45 PM

Nobody likes to see their phone bill go up, but the most important thing is that economic "signals" not be artificially constrained. I have no idea what level of profit the telecoms need to give their shareholders a decent return, compensate their employees fairly, and invest enough in new product and service development and deployment so that their customers will be satisfied in the years to come, but we do need to assure that there is no interference with the relevant economic signals.

That said, we do need to also assure that there is plenty of room for true competition (not just the silly "co-habitation" form promoted by the 1996 "Act") and diligent monitoring and action with regards to anti-competitive business practices.

-- Jack Krupansky

jay

May 18, 2005 07:46 PM

In reference to the human capital editorial.
The concept of human capital is specious. The physics of the situation are against it (humans are entropy machines). The biology of the situation is against it, Americans are ecological disasters. The illusion of human capital is only sustained by huge expenditures of energy --now becoming less practical. On average each additional person is a debit not a credit.
JS Kelley

Thank you for your interest. This blog is no longer active.

 

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Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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