FCC Report Declines to Conclude Wireless Industry Effectively Competitive

"The Sixteenth Report follows the same analytical framework used in the Fifteenth and Fourteenth Reports, with certain improvements based on responses to those Reports,” the new version said (http://bit.ly/WTer9C). “The Sixteenth Report also makes no formal finding as to whether there is, or is not, effective competition in the industry. Rather, given the complexity of the various inter-related segments and services within the mobile wireless ecosystem, the Report focuses on presenting the best data available on competition throughout this sector of the economy and highlighting several key trends in the mobile wireless industry."

The report said prices continue to decline. From 2009 to 2010, the annual wireless consumer price index “decreased by nearly 3 percent while the overall CPI increased by 1.6 percent,” the report said. “From 2010 to 2011, the annual Wireless Telephone Services CPI decreased by another 3.6 percent, while the overall CPI increased by 3.2 percent and the Telephone Services CPI decreased by 1.1 percent.” As a measure of market concentration, the FCC found that the weighted average Herfindahl-Hirschman Index (HHI) was 2873 at the end of 2011, “essentially unchanged from 2868 at the end of 2010, and an increase from 2811 at the end of 2009.” The HHI for individual Economic Areas (EAs) “ranged from a low of 2008 in EA 108 (covering parts of Wisconsin) to a high of 7178 in EA 146 (covering parts of Montana),” the report said. An HHI above 2500 is considered to be highly concentrated.

The report also looked at spectrum holdings of the carriers, computing the numbers, but offering no conclusions. “As noted in the National Broadband Plan, making sufficient spectrum available to meet growing spectrum needs is integral to enabling network expansion and technology upgrades by providers,” the report said. “In the absence of sufficient spectrum, network providers must turn to costly alternatives, such as cell splitting, often with diminishing returns."

Commissioner Robert McDowell “concurred” with the report, saying the FCC did not meet a requirement of Congress. Congress “tasked us with making a finding as to whether this sector is competitive,” he said. “Clearly, it is. For this reason, I vote to concur to the Sixteenth Mobile Wireless Competition Report, as I have for the last two reports."

Commissioner Ajit Pai partially concurred. “For what it’s worth, the answer is pretty obvious to me,” Pai said. “Yes, there is effective competition. That’s what our report shows in page after page of analysis. That’s what the Wireless Telecommunications Bureau basically found last week when it approved the combination of the fourth and fifth largest wireless providers in America without seeking a vote by the full Commission."

But Commissioner Mignon Clyburn, who voted to approve the report, said she continues to watch the level of wireless competition closely. “I am pleased that we have been improving the amount and quality of the data presented on key factors related to the structure of the wireless industry,” she said. “Enhanced analysis will improve the Commission’s ability to ensure the market structure protects consumer interests."

CTIA President Steve Largent agreed with the criticism of the two Republican commissioners. “We believe that a clear-eyed assessment of the level of investment, network deployment, world-leading operating systems, devices, applications and services conclusively demonstrates the value and benefits that consumers and businesses receive from the U.S. wireless industry,” Largent said. “In this respect, we regret the Commission missed an opportunity, again, to make a finding about the robust level of competition that consumers enjoy in the U.S."

"This new report adopts a number of new data-collection techniques and we commend the FCC staff for their hard work,” said Public Knowledge Staff Attorney Jodie Griffin. “Unfortunately, the results show that the wireless market remains highly concentrated, giving providers less competitive incentive to pass on cost savings to consumers, aggressively invest in their networks, and adopt customer-friendly practices."

"The FCC report demonstrates that four out of five Census blocks have more choices for a wireless provider than they have for peanut butter in the grocery store, that revenue per minute continues to decline, and that capital expenditures by the providers continue to rise despite the soft economy,” said Ev Ehrlich, president of ESC Co. and former undersecretary of Commerce in the Clinton administration. “And yet they're unwilling to declare the industry competitive, despite these obvious symptoms of competition. Readers of the report should bypass this evasive conclusion and judge the evidence for themselves.”