Description
This case examines AT&T’s wireless business with a focus on its text messaging services. The industry features a high proportion of fixed costs in relation to acquiring spectrum and building a network. Variable costs are relatively low, especially in the case of SMS text messages. Pricing and margins in text messaging have attracted regulatory scrutiny in the Unites States, Canada, and elsewhere. The case requires the use of key concepts in cost behaviour, cost volume profit analysis, and product costing to understand the nature of the business and the profit margins involved. Many service or high-tech businesses exhibit similar cost behaviours, and so the case gives students insight into the management of such enterprises.
Learning Objective
This case will: ·Introduce students to the reverse engineering of a cost in an industry where costs are tightly shielded. ·Give students the chance to review the margins in the wireless industry and understand how data operates and how carriers can repackage the same product and offer it with different pricing. ·Give students the chance to analyze various packages offered by the wireless industry, which will encourage them to critically consider the “best” customers for this industry.Give students exposure to key cost drivers. They will learn to think critically about volume as a cost driver and how wireless carriers can use this driver to continually raise prices.