eli5 Why do internet providers and telecommunication companies have similar or identical prices for their packages? Wouldn’t slightly lowering the cost give the illusion of ‘same speed lower prices’ and improve their business?



I understand that at some point operational costs come into play but wouldn’t they automatically quote a price much more or decently greater than it?

In: Other

Most ISPs have a “monopoly” in a particular area with next to no competition (or any serious competition). A competitor with lower prices isn’t going to take away so much business that it becomes a threat. So the bigger company essentially sets the price and the others base theirs off of that.

Some would call it price-fixing (That is, companies getting together and agreeing to charge the same price so nobody loses out – everyone gets a bigger slice of the pie).

ISPs would deny it and say that with something like internet access, costs are mostly fixed – they all use the same infrastructure (Within most areas – ductwork, cables etc), there’s a limited amount of civils companies that can dig trenches etc, so they supply their services at a roughly similar cost to each company, and the back-end equipment is much the same (Cisco, Juniper etc, etc).

If you undercut your competitors price a little bit to gain some customers, then they do the same, it just creates a feedback look where you both will eventually end up with low prices and no profits.

It’s easier and more profitable to have your marketing department advertise gimmicky features and meaningless stats about the quality of your service compared to your competitor.

There are other ways to get customers. For example, at my previous apartment, the complex had signed an exclusive contract with a smaller ISP, and that was my only choice for cable internet. When I moved to a different apartment, I was able to sign on to a different provider that was literally double the speed at half the price.

No need in a lot of areas there is one company controlling that market sometimes three companies are all owned by the same parent company giving the illusion of competition