SBC Price War Peace Not Worth Much

"SBC signals end to price wars," read the headline in Monday's Financial Times about the discontinuance of DSL pricing promotions.

And all I could do was laugh.

Price wars don't end when one player stops them. Price wars end when there is structural change in the business through consolidation. If you told me that there will be no more competition in DSL because a bunch of competitors have gotten together to fix pricing, I would tell you that the Justice Department will be making calls shortly to end that oligopoly. If you told me that one player has discontinued a promotion because it wanted to "relent" in the wars, somehow signaling that it no longer wanted to play, I would still tell you that the signaling would draw the attention of the Justice Department.

More important, though, you can't end a price war when you have so many players duking it out for business, and there has yet to be serious consolidation in telecom.

So why do these stories get written? Because someone at the editor's desk doesn't believe in economics and what happens when competitors compete.

What would I do?

Well, if I'd bought SBC (SBC - commentary - Cramer's Take) on this story, as many people did, I'd sell it. And I would have just made a dollar that I shouldn't have.

Random musings: I'm surprised Dynegy (DYN - commentary - Cramer's Take) isn't up more. This Illinois Power deal with Ameren (AEE - commentary - Cramer's Take) was a much better deal than the Exelon (EXC - commentary - Cramer's Take) offer.

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At the time of publication, Cramer was long Dynegy.

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