FCC dings wireless industry on competition

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WASHINGTON--Dealing a blow to the U.S. wireless industry, the FCC said for the first time in nearly a decade that the industry is not "effectively competitive." The commission, in its annual report on the state of wireless competition, did not say the industry is uncompetitive, but instead took a neutral stance. 

The FCC voted to approve the 300-page report, the 14th version of the Mobile Wireless Competition Report.  But the commission's two Republican commissioners, Robert McDowell and Meredith Attwell-Baker, voted to concur with the report, expressing displeasure with some of its conclusions.
 
Last August, the FCC opened its probe into wireless competition. Previously, the FCC has produced a report focusing on Commercial Mobile Radio Service, known as the CMRS report. The new report focused on a wider range of players in the mobile ecosystem, including "upstream" players such as network equipment vendors and backhaul and tower providers, and "downstream" elements such as handset makers, application developers, software makers and mobile content providers. The report also looked at how new technologies affect competition and how competition varies across different geographies, especially the difference between urban and rural areas. 

FCC Chairman Julius Genachowski said that the commission is not trying to "reach an overly simplistic 'yes-or-no' conclusion" about the level of competition in the industry, and applauded the granular approach the report took in analyzing competition. "Instead, the report complies with Congress's mandate to assess market conditions by providing data on trends in competition and choice over time," he said. 

In presenting the report, the FCC staff noted the surge in smartphone usage and mobile data use. Chelsea Fallon, a senior analyst in the FCC's Wireless Telecommunications Bureau, noted that in 2004, 4 percent of consumers' monthly wireless bills related to wireless data charges; in 2008 that number grew to close to 22 percent. Fallon also noted that users of USB modems and laptops with embedded mobile broadband generated 1.4 GB of data usage per month.

Commissioner Michael Copps expressed concern about consolidation in the wireless market. "All of the findings of this report are not comforting," he said. "Some are downright sobering and worrying, too." The report found that consolidation among carriers in the industry has increased 32 percent since 2003.

McDowell noted that 74 percent of Americans have access to five or more wireless service providers, up from 65 percent a year ago. He also said that report shows the growth in mobile broadband access, noting that 76 percent of consumers have access to three mobile broadband service providers, up from 51 percent in 2008. "If nothing else, the report shows that the wireless sector is so dynamic, ever-improving and responsive to consumer demands," he said. "Thus, we should tread cautiously." He also warned that the report could lay the foundation for further regulation of the industry. "I cannot support the theory that government policy would produce better results than the market," he said. 

However, Commissioner Mignon Clyburn said she was worried by how rural Americans are being left behind. She noted that more than 900,000 Americans do not have access to wireless service, and that 24 million Americans have access to only one carrier. She, like McDowell, applauded Verizon Wireless' (NYSE:VZ) recently announced proposal to share its 700 MHz LTE spectrum with rural carriers. 

Baker said that the data in the report should have led the FCC to conclude that there was "effective competition" in the industry. "I welcome the dialogue with those who have concerns, but I see nothing in this report that should question the overall competitiveness and vitality of the industry," she said.

The CTIA, too, expressed its disappointment with the report. "We believe the commission missed an opportunity today to truly highlight one of the few glowing examples of investment, innovation and consumer choice in the U.S. economy," CTIA President Steve Largent said in a statement. "While we understand that the Commission is not making any conclusion about the state of competition in the market, nor are they suggesting that the marketplace has changed to the detriment of consumers during 2008, we nonetheless are disappointed and confused as to why they've chosen not to make a finding of ‘effective competition' for that year."

"We are very concerned, however, about the potential misuse of ‘policy levers' that are referenced in the report and believe that any attempt to add regulation to wireless as a result of this report would be both misguided and harmful to consumers," Largent added.  "We hope--and expect--that in the future, the chairman and commissioners will take every opportunity not only to highlight all of the good that is flowing to consumers and the U.S. economy from this industry, but also to make policy decisions based on this incredible fact-based record."

For more:
- see this CTIA statement

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