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Kovacs: Wireless competition brings value and choice to consumers

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Anna-Maria Kovacs

Kovacs

The Federal Communications Commission (FCC) issued its 16th Wireless Competition Report on Friday. The report is full of good news about innovation, investment, and competition. But the finest news is that U.S. consumers get the best value in the world, have abundant choices, and make great use of both.

The report shows that Americans get the best prices for wireless in the world, by far. Price per minute in the U.S. in 2011, at 3.3 cents, was only half of the next best, Singapore's 6.4 cents.  It was about a third of most of Europe's, which range between nine and ten cents, and a seventh of Japan's 20.5 cents.

Not surprisingly, Americans make extensive use of their wireless service. They talk on their phones 945 minutes per month, roughly 2.5 times as much as their Canadian neighbors and more than 7 times as much as their friends in Japan and Germany. In fact, more than a third of U.S. households have cut the cord altogether. 

Looking at U.S. data in isolation, it is clear that wireless provides terrific value. Its price decreased while other prices have increased. The report shows that a consumer who in 1997 spent $1 on each of: an average basket of goods called the CPI, on wireless service, and on wireline-telephone service, by 2011 would have spent $1.40 on CPI, $0.60 on wireless and $1.02 on telephony. In other words, the price of wireless today is only 43 percent of the price of the CPI basket of goods. The price of telephony, which for much of the period was regulated and to some extent still is, has also decreased but less so. Wireless prices, of course, are not regulated and reflect competition in the marketplace.

Good value is, not surprisingly, the result of competition. Most consumers have the choice of five or more providers of wireless service, whether voice or broadband.

Wireless-voice and broadband are now almost ubiquitous in the U.S. The FCC's report shows that at least one provider of wireless voice is available to 99.9 percent of Americans and at least one wireless-broadband provider is available to 99.5 percent. Those to whom service is not available live in the most sparsely settled parts of the U.S., where population density is below 1 person per square mile. It is, of course, important to make service available to all Americans, and the Universal Service Fund may be helpful here.

Even in rural areas, there is a choice of providers for most consumers. There are two or more providers of wireless-voice in areas with population density above 11 people per square mile and two or more providers of mobile-broadband above density of 22 people per square mile. It is worth noting for perspective that average population density in the U.S. is 82 people per square mile and for urban areas it is 430 people per square mile.

Even better, LTE--the very-high-speed mobile-broadband technology--is available to 86 percent of the population, and that coverage is on its way to 95 percent or more. Given that no carrier provided LTE as recently as 2010, that level of deployment within two years is astounding. It reflects the very high level of capital investment by this industry--$25 billion in each of the last two years. 

It is also great for consumers that all four major U.S. carriers plan to deploy LTE broadly, and three have already done so. RootMetrics tested LTE speeds of various carriers across the U.S. and reported in early March that average LTE speeds range from AT&T's 18.6 megabits per second (Mbps) to Verizon's 14.3 Mbps, to Sprint's 10.3 Mbps, with AT&T's peak speed at 57.7 Mbps.  RootMetrics noted that "LTE offers a completely different consumer experience" and praised the "Lightening fast data speeds and expanding coverage."  Given that minority consumers rely on wireless even more than other groups, the availability of such high-speed mobile broadband is especially significant.

Ample choice of both voice and broadband wireless providers is available regardless of median household income. Every bracket from $0-$25K to $150+K has at least four wireless broadband providers and five voice providers. The report also notes that the average number of mobile-broadband providers has increased by more than 1.3 for all income groups since 2010.

Of course, consumers have myriad other choices with regard to their wireless experience. They choose among various types of service plans:  paid v. prepaid, individual v. family, limited v. unlimited, various mixes of voice/text/data. They also choose among hundreds of devices, a few operating systems, and millions of applications. By the time a consumer has chosen a carrier, a service plan, a device, and operating system, that individual has chosen among literally hundreds of possibilities. It is not surprising that this intense competition at various levels of the wireless ecosystem has provided Americans with the lowest prices and the greatest value in the world.

Anna-Maria Kovacs is a Visiting Senior Policy Scholar at Georgetown University's Center for Business and Public Policy. She has covered the communications industry for more than three decades as a financial analyst and consultant.