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Reason Foundation

FCC Finds Plenty of Wireless Competition

Steven Titch
June 29, 2011, 1:36pm

Timing being what it is, the Federal Communications Commission released its annual report on the state of U.S. wireless competition a week after the deadline for comments on the pending merger of AT&T and T-Mobile.

By itself, the report would have been a formidable comment in support of the deal. The findings do nothing but strengthen the argument that the U.S. wireless market is more competitive than ever, and add more weight to the idea that AT&T and T-Mobile will be good for consumers today and for overall wireless development in the future.

The principal argument against the merger, advanced by advocacy groups such as Free Press and  Public Knowledge, is that the wireless industry is drifting toward consolidation, stagnation and an inevitable duopoly of AT&T and Verizon.

To the contrary, the FCC finds that, as of 2010, 89.6 percent of the population can choose from as many as five service providers in their local market. This represents an increase from 72.8 percent in 2009.

Meanwhile, voice revenue per minute declined 9 percent from 2008 to 2009, continuing a downward trend that has lasted two decades. Price per text dropped for the fifth consecutive year, this time by 25 percent from the previous year, according to the report.

The FCC report also spotlights the declining cost of mobile broadband data service, which critics say service providers have been marking up to offset declines in voice revenues. “AT&T’s estimated price per megabyte (MB) for data traffic – calculated by dividing AT&T’s reported annual wireless data revenue by its reported mobile broadband traffic – has declined from $1.21 in 2008 to $0.35 in 2009 to $0.17 in 2010,” the FCC states in paragraph 194.

Further, that figure, estimated as it is, may be high. The report also sites independent findings from  Bernstein Research, the respected market research firm, that the typical price-per-MB for unlimited data plans on smartphones ranges from $0.02 to $0.15, and the typical price-per-MB for data plans for laptops and wireless data cards ranges from $0.01 to $0.08.

The 2011 report shows us the same picture as 2010’s. That report noted that wireless per minute-rates in the U.S. are the second lowest in the world. Only in Hong Kong do consumers pay less per minute, 4 cents compared to 5 cents in the U.S. And while the report found that average monthly bills in the U.S. are higher than in Western Europe, it noted that U.S. customers get far more value for their dollar.

A comparison of the U.S. market with other developed markets reveals that consumers in the United States pay relatively more on a monthly basis than most other countries but also consume more airtime and enjoy lower unit rates. Despite the decrease in minutes of use (MOUs) from 2007 to 2008, U.S. mobile subscribers continue to lead the world in voice usage by a substantial margin, with Western European subscribers averaging 158 MOUs and Japanese subscribers averaging 139 MOUs, compared to more than 700 minutes in the United States.

What’s more, the same FCC report found that for U.S. service providers, average revenue per user (ARPU) fell from $49.41 to $47.09 per month between 2004 and 2008. ARPU for voice services, which in policy circles is viewed as more crucial than more elective data services, the APRU drop was even steeper, from $47.23 to $36.98 per month. This decline continued through 2010, accoridng to the current 2011 report.

Given the ubiquity of wireless service, and the attention that the two leading carriers both receive from the media and seek for themselves through aggressive promotion, it’s easy to get an emotional impression that there are only two service providers that matter. But this research shows that such impressions do not reflect the facts. The U.S. market is still highly competitive and shows all signs of remaining so.



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