Carriers Fight over Wireless Competition

The FCC has correctly noted a trend toward increasing market concentration, as a result of the “two largest providers, AT&T and Verizon Wireless, having 60 percent of both subscribers and revenue,” T-Mobile USA said. It urged the agency to make additional spectrum available for commercial mobile broadband services, move forward with its proposal to extend roaming obligations to non-interconnected data services, ensure that special access services are available at reasonable rates, terms and conditions and commit to pole attachment rule revamps.

Cricket, a prepaid wireless provider, urged the FCC to adopt a regulatory framework to prevent “the very largest mobile providers” from “exerting their market power over critical inputs.” In addition to adopting data roaming obligations, to cultivate competition for wireless services the commission must give smaller carriers a reasonable chance to add spectrum, it said. Cricket urged the commission to explore eligibility restrictions for coming spectrum auctions. The commission should assess the impact on wireless competition of special access backhaul pricing and availability, it said. Cricket also supported comments recommending measures to make certain that any additional spectrum made available is spread beyond the carriers with dominant spectrum positions. It also urged adopting reasonable rates for special access services.

U.S. Cellular said the FCC should consider the imposition of a spectrum cap, by county, that would apply to the acquisition of wireless spectrum by both transfer and assignment and auction. The regional carrier was quick to point out that it doesn’t propose a specific cap: The commission should develop the evidence in a focused proceeding to determine what cap is needed to preserve competition. And the FCC should consider additional steps to deal with the increased concentration and new barriers to competition, the carrier said, urging the commission to act on handset exclusivity and review the effects of AT&T and Verizon’s handset practices, especially regarding the 700 MHz band. U.S. Cellular also urged the FCC to adopt data roaming requirements and revamp special access backhaul as wireless data traffic expands “exponentially."

CTIA said the 14th wireless competition report overemphasized the HHI Index -- a measure of market concentration -- and incorrectly calculated HHIs and so overstated concentration. The misinterpretation of evidence in the report has led some to conclude that there’s a market failure and a regulatory “lever” should be used, the trade group said. It cited comments by Robert Willig, a Princeton University economics professor, that the FCC’s reluctance to make the “factually-supported” finding of effective competition suggests an “inclination” to tighten regulatory control over the wireless market. Increased regulation would be expected to distort the economic incentives of market participants and the workings of competition, undermining the industry’s delivery of consumer benefits, Willig said.

CTIA, citing Willig, a former U.S. deputy assistant attorney general, said concentration measures like HHIs shouldn’t be considered conclusive indicators of the presence of market power on their own. The report also improperly excluded MVNOs from the competitive analysis, CTIA noted. The report failed to take into account other competitive influences on the wireless market, including Wi-Fi hotspots, CTIA said. Willig attacked the report’s lack of transparency, saying the FCC’s specific reasons for not concluding that the market is competitive are unclear. Willig cited declining churn rates in recent years. But regardless of trends over time, it’s clear that churn is high enough to indicate that consumers move between carriers enough to discipline severely carriers’ offers, he said.

A few commenters that complained about the state of the industry failed to provide reliable facts or meaningful data to make their cases, Verizon said. While all wireless providers would benefit from the allocation of additional spectrum, small and midsize providers have access to spectrum and have acquired substantial spectrum holdings, it said. The carrier attacked MetroPCS’s argument that the agency has allowed the largest carriers, AT&T and Verizon Wireless, to acquire other wireless carriers, further concentrating the market. Even a high market share doesn’t necessarily show market power, Verizon said. And the service plans available in no way reflect collusive parallel pricing, it said.

Some urged the commission to regulate data roaming, handset exclusivity, backhaul and spectrum allocation, AT&T said. But the requests are “self-serving attempts to game the regulatory process to the benefit of individual carriers,” it said. AT&T noted that the only commenter that argued the market isn’t effectively competitive is Free Press. AT&T attacked what it called Free Press’s “selective comparison” of service price. It “completely ignores many lower-priced U.S. data card plans, the carrier said.