Reply to post: Econ 101 - Fail

Google's plan to become your phone company


Econ 101 - Fail

"All of those sums will eventually find their way back to consumers through their cell phone bills."

Sorry, but the costs of buying the bandwidth in a govt. auction are called sunk costs, and are fixed. Companies (want to) produce at profit maximising levels, i.e. where marginal cost = marginal revenue. Fixed costs play no part in determining where this level is and hence the amount the phone company pays has absolutely no bearing on the ultimate cost to the consumer.

Which isn't to say a company splurging their money on a license won't likely provide a worse service, money is in limited supply and money spent on licence means money not spent elsewhere (or given back to shareholders).

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