FCC Republicans Say Report Should Have Found Wireless Industry Is Competitive

Baker addressed the report’s silence on the issue head-on, asking Wireless Bureau Chief Ruth Milkman why, “for the very first time in several years,” the report does not conclude that there is “effective competition” in the wireless market. “It’s a really good question,” Milkman replied, noting that the lack of a statement on industry competitiveness was not a criticism. “What we set out to do when we started drafting this report was to collect the facts and to analyze them and to collect facts about a broader expanse of the mobile wireless ecosystem,” she said. “We were focusing on the data and the analysis rather than conclusions. We thought we would just lay out for the commissioners all the data and the analysis and stop there and that’s what we did."

Baker believes “we actually should have made an affirmative finding of a competitive market based on the year-over-year trends set forth in the report and the significant consumer opportunities and investment provided by the wireless industry,” she said. “Prior annual reports have drawn such conclusions and I see no reason to depart from that approach here."

Industry sources said silence on the competitiveness of the industry appears to contradict the 1993 Omnibus Budget Reconciliation Act, which requires annual competition reports. Section 332(c)(1)(C) states the FCC’s analysis “shall include … an analysis of whether or not there is effective competition” in the wireless industry.

Milkman said the commission’s report follows the law. What Congress required “in an analysis of whether or not there is effective competition,” she told reporters. “That’s what the report does, it analyzes it. It’s also probably worth noting that the first seven reports that the commission issued did not include a finding of effective competition. They simply included the analysis."

McDowell disagreed. “I vote to concur … because, even under the ‘new forms of analysis,’ set forth in today’s report, we have not identified new or particularly revealing information that would prevent us from opining as to ‘whether or not there is effective competition,’ as the statute requires,” he said.

Genachowski declined to say during a news conference whether the conclusions in the report mean the FCC needs to impose additional regulation on the wireless industry. “The purpose of the competition report is to have data that’s used for all of the relevant decision making by the commission,” he said. “The facts and data will help us make the right decisions in all the issues that come up. In some cases that will be to do absolutely nothing. In some cases it will be to take smart actions to spur competition."

Commissioner Michael Copps, a critic of previous reports as prepared under Republican chairmen, said this time the agency got things right. “It is far-and-away the most informed and informative Competition Report that we have seen over the years,” he said. “For the first time in my nine years at the Commission, I find the kind of comprehensive and granular analysis that I have been looking for since I got here.”

Copps said parts of the report raise real concerns. “Unfortunately this report’s findings are not always encouraging,” he said. “Some are downright sobering -- and worrying, too. Specifically, the Report confirms something I have been warning about for years -- that competition has been dramatically eroded and is seriously endangered by continuing consolidation and concentration in our wireless markets. One number sticks out like a sore thumb: the Herfindahl-Hirschman Index (HHI), a widely-recognized and highly-credible measurement of industry concentration, shows that the concentration of mobile wireless service providers has skyrocketed to a weighted average of 2848. That’s a jump of nearly 700 since we first calculated this metric a mere 7 years ago."

Commissioner Mignon Clyburn also said the report raises red flags. “This report reveals that, despite the hundreds of billions of dollars that have been invested over the past decade, more than 900,000 people live in rural areas where they have no access to any wireless service provider,” Clyburn said. “More than 2.4 million people live in geographical areas covered by only one service provider. And more than seven million people live in areas served by only two service providers."

"We are pleased the FCC report identifies concern with wireless competition, and we look forward to working with the Commission to identify policy areas that will enhance competition for rural America,” said Rural Cellular Association President Steve Berry. “Competition is all about consumers, and it is clear that consumers are choosing wireless technologies. As the migration from wireline to wireless occurs, choices are needed in order to maintain a healthy marketplace."

Berry noted that Verizon Wireless and AT&T are “pulling out all the stops” to acquire and maintain the 700,000 customers each month who abandon their wireline service. “They realize that now is the critical time to secure their market dominance with consumers,” he said. “It is important to not confuse the overwhelming migration from wireline to wireless with an assumption that wireless competition in all markets is alive, well and healthy. The FCC must continue to promote competition and innovation, as the long term benefits to consumers in rural and regional areas could be jeopardized if there are fewer competitors in the marketplace.”

The Rural Telecommunications Group agreed the report raised good questions. “According to the report, over one in five Americans lives in a rural county,” RTG said. “Unfortunately, at least 3.4 million of those living in rural counties have no mobile wireless coverage whatsoever or service from only one mobile wireless carrier."

But Kathleen Grillo, Verizon senior vice president of federal regulatory affairs, noted that the U.S. wireless industry is the most competitive in the world. “New devices and new apps hit the market constantly,” she said. “Prices keep falling and usage keeps rising. Competition is bringing enormous benefits to consumers, as reflected in the American Consumer Satisfaction Index’s new report showing wireless customer satisfaction is at an all-time high. The facts and the record establish conclusively that the wireless marketplace is ‘effectively competitive,’ as the FCC has found in the previous six wireless competition reports."

"For six successive reports, the FCC has confirmed what is obvious to any consumer who watches television, walks down a busy main street or reads a newspaper -- that the wireless market is intensely competitive, with new choices in services, applications and devices available almost weekly,” said Robert Quinn, AT&T senior vice president. “That’s why it’s so disappointing that this FCC seems reluctant to acknowledge the market’s success."

The report is a “missed opportunity,” said CTIA President Steve Largent. “We believe, based on the facts submitted, that a determination of effective competition in the wireless marketplace is not only inescapable, but is actually quite simple,” he said. “Whether based on HHI, the raw number of competitors in each market, investment, handset and network innovation, price or consumer choice, the U.S. wireless market is the envy of the world.” Jonathan Spalter, chairman of the Mobile Future Coalition, said: “We urge the FCC to recognize this thriving sector while maintaining a policy climate that continues to encourage competition driven above all by consumer demand and the vision of innovators.”