The FCC did not conclude that the U.S. wireless industry is "effectively competitive" and in a new report declared that the market remains highly concentrated among the four Tier 1 carriers. In its 17th "Mobile Wireless Competition Report," the FCC's Wireless Telecommunications Bureau notes that consolidation is continuing.
As it has in the past few years, the FCC did not reach an overall conclusion or formal finding on whether the wireless industry is effectively competitive. Instead, the agency provided an analysis of the industry and a look at its competitive metrics and trends.
"Given the complexity of the various inter-related segments and services within the mobile wireless ecosystem, we refrain from providing any single conclusion because such an assessment would be incomplete and possibly misleading in light of the variations and complexities we observe," the report notes in its introduction. "Rather, the Report focuses on presenting the best data available on competition throughout this sector of the economy, both at the regional and national level, and highlighting several key trends in the mobile wireless industry."
The report presents data and analysis covering 2013 and the first half of 2014, to the extent data was available, and analyzes competition across the entire mobile wireless marketplace, including key market segments such as spectrum and infrastructure.
The report highlights several positive trends in the industry. The FCC noted that carriers are expanding LTE coverage, boosting downlink speeds and allowing more data usage for the same or lower prices.
In terms of market concentration, the report notes that Verizon Wireless (NYSE: VZ) and AT&T Mobility (NYSE: T) had 68 percent revenue share in 2013. When Sprint (NYSE: S) and T-Mobile US (NYSE:TMUS) are added in, the four Tier 1 carriers accounted for about 95.3 percent of the nation's mobile wireless service revenue in 2013, up from 91.5 percent in 2012. U.S. Cellular (NYSE:USM) generated just 1.9 percent of service revenue in 2013, and nTelos Wireless contributed 1.4 percent.
Last year T-Mobile merged with MetroPCS and early this year the FCC approved AT&T's acquisition of Leap Wireless and its Cricket brand, removing two key Tier 2 carriers from the market as independent entities. The list of carriers that have announced plans to exit or withdraw from the market or have already done so this year include Cincinnati Bell Wireless, Revol Wireless, Mobi PCS, Golden State Cellular, Plateau Wireless, Cellular One in Wyoming and Montana, AirFire Mobile and others.
The FCC pointed to a continued gap between the choices available to rural customers vs. non-rural ones. Sprint and T-Mobile respectively cover 264 million and 260 million POPs with LTE, around 40 million less than Verizon and AT&T.
"The percentage of the population living in census blocks covered by at least two providers was also similar for rural and non-rural areas. The gap between rural and non-rural coverage jumps when we consider coverage by at least three or more providers, narrowing again when we consider the percentage of the population living in census blocks covered by at least five providers," the report notes. "The percentage of rural residents living in census blocks with at least one available mobile broadband provider did not change significantly between January 2012 and January 2014. During the same time period, the percentage of rural residents living in census blocks with at least two, at least three, or at least four available mobile broadband providers increased by 8.4 percent, 13.6 percent, and 9.9 percent, respectively."
Scott Bergmann, vice president of regulatory affairs at CTIA, said that the report shows that 97 percent of Americans may choose from at least three different carriers and that the FCC should not regulate mobile broadband as a Title II common carrier service.
"Today's report only adds to the substantial evidence that the mobile broadband industry delivers for consumers and should continue to be subject to a mobile-specific Title I approach, which resulted in billions of investment annually, significant new options for consumers throughout the mobile ecosystem and carriers constantly differentiating themselves with new service plans and offerings," he said in a statement.
There was a great deal of pushback from the two Republican FCC commissioners over how the report was released, which was done at the bureau level and not by a vote of all five commissioners. "The Chairman's Office directed the Wireless Telecommunications Bureau to release today two major items," Commissioner Ajit Pai noted in a statement. "The first abdicates the annual responsibility Congress gave the Commission--not the Bureau--to make an assessment of the state of competition in the wireless industry. The second grants a T-Mobile petition that asked the Commission--not the Bureau--to regulate cellular data roaming rates by providing guidance on what the Commission meant in its 2011 data roaming order. FCC decisions issued on the Bureau level cut the Commissioners out of the decision-making process entirely."
Pai said that he and Commissioner Michael O'Rielly jointly requested that the items be brought before the full commission for a vote and that FCC Chairman Tom Wheeler refused. "This is not how democracy works," Pai said.
An FCC official said Wheeler offered Pai and O'Rielly the opportunity to vote on the report if they agreed to vote on the item by Jan. 15, and in response Pai's office demanded Wheeler also bring the data roaming ruling up for a vote.
"The job of the Commission is to make decisions in a timely manner. Industry and companies need to know how to run their businesses," Wheeler said in a statement. "All Commissioners were given the opportunity to vote on the Mobile Wireless Competition report. In addition to the Bureaus' general delegated authority pursuant to Commission rules, the 2011 Data Roaming Order, which was subject to full Commission vote, specifically delegated authority to the Wireless Bureau to resolve 'disputes with respect to the data roaming rule,' including potentially 'a petition for a declaratory ruling.' The action today was in accord with that previous decision. I will continue to work with all my colleagues, but the work of the Commission cannot be inappropriately held up."
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