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June 22, 2010 9:59 AM

Aren't "Price For Life" Schemes Bogus If Telecom Is Competitive?

One growing trend among America's communications providers is the offering of "price for life" services. These promise to deliver a guaranteed price for service for the life of a customer.

But there's a bizarre assumption underlying these offers, namely that carriers are threatening that the price of service may go up unless customers protect themselves with "price for life" packages.

Now, correct me if I'm wrong, but if the telecommunications market is competitive, doesn't that mean the price of service should go down over time and not up?

The whole premise behind arguments for market-driven broadband policies is that sufficient competition does exist to trigger market-driven investment and pricing dynamics.

And yet here we have carriers trying to sell "price for life" packages on the one hand, while declaring there's sufficient competition on the other.

While an argument can be made that "price for life" packages that include TV service do have merit as the ever-increasing rates of content providers puts constant upward pressure on cable TV pricing, the same can't be said for telephone and data services.

In fact, the only way the cost of telephone or data should go up in a competitive market is if the provider is offering significant additional value to existing services. But here again the "price for life" scheme falls short as they tend to lock customers in to specific service tiers.

With this in mind, the only way I can see "price for life" schemes being something that benefits customers is if the contracts include service level escalators, so that while you continue to pay the same your service improves over time. But so far I haven't seen any "price for life" packages that offer this.

To me, the simple inescapable truth about "price for life" offerings is that either the carriers don't believe their own hype about the telecommunications market being sufficiently competitive to keep down prices or providers are trying to pull a fast one on their customers.

So which one is it? Are providers who are selling "price for life" deals lying to government about the competitiveness of their markets, or are they lying to their customers about the value they deliver?

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