The US Federal Communications Commission (FCC) in late September declared a competition problem in the country’s wireless market – which seemed a plague since 2009 – was finally solved. But how accurate is the finding?
In its latest report, the commission looked at: “a number of facts and characteristics of the provision of mobile wireless services which, taken together, indicate that there is effective competition”. Among the factors cited were an increase in consumer demand and operator output, dropping prices, greater network investment and access to spectrum, and boosts in service quality and speed.
However, the report explicitly stated the FCC shifted its focus this year to avoid a “full market definition or market power analysis” which would have required an in-depth look at “supply and demand factors at the national level”.
Republican commissioner Brendan Carr, in comments delivered before a vote on the report, said: “providers are competing vigorously with each other through innovative technologies and service plans”.
But, BTIG technology, media and telecoms (TMT) analyst Walter Piecyk pointed out in a research note there are a handful of signs indicating “the wireless industry is not as competitive as many believe”.
In particular, Piecyk pointed to the end of promotional rate plans at T-Mobile US and Sprint (both have bumped up the cost of unlimited tariffs), less aggressive and shorter-lived iPhone promotions in 2017, and a decision by Comcast to drop a $200 subsidy on premium smartphones.
There have been no competitive responses yet to Sprint’s return to the 5/$90 promotion. https://t.co/KnV63nP12H
— Walt Piecyk (@WaltBTIG) August 28, 2017
During an investor conference in May, Sprint CEO Marcelo Claure talked about a $10 price increase the operator implemented on its unlimited plan: “customers have an expectation that as data basically doubles or triples pretty much year-over-year, customers are okay by having an increase of $5 to $10”.
Claure forecast more price hikes are on the way as well: “In order for this industry to be healthy, I think eventually all carriers will have to basically increase prices in the next few years as data consumption increases,” he said.
On the speed front, OpenSignal’s State of LTE report (issued in June) clocked the US at number 59 in average global LTE download speeds. OpenSignal’s subsequent State of Mobile Networks: US report in August stated LTE speeds on Verizon and AT&T’s networks have actually been “dropping steadily” since the reintroduction of unlimited plans.
It should be noted those “unlimited” tariffs come with data caps allowing operators to slow user speeds after a certain amount of data is used in a given month. T-Mobile currently has the highest threshold at 50 GB; the operator increased its limit in September after adding Netflix to its service lineup. The unlimited plans also allow operators to control the quality of video streams on those tariffs, bringing them down from HD quality to use less data. For example, Verizon Wireless announced in August it will restrict the quality of video streamed to smartphones and tablets on its network.
Though Democrats at the FCC and elsewhere on Capitol Hill have warned about the impacts of a potential merger between T-Mobile and Sprint on competition, another voice from within the US wireless industry itself persistently warned there’s not enough balance in the existing mobile market.
The Competitive Carriers Association, an industry association of smaller and regional operators which counts T-Mobile and Sprint among its members, repeatedly said there is a dearth of options in the marketplace.
“Competitive carriers serve some of the most rural and hard-to-reach areas, and their experiences more than validate the unfortunate reality that many parts of the country do not receive, much less have, competitive choice for mobile wireless service,” CCA CEO Steven Berry said in a statement in May.
Berry noted AT&T and Verizon control 71 per cent of operator market share by service revenue, and their subscriber counts dwarf those of competitors.
“AT&T and Verizon continue to engage in secondary market transactions that dilute the competitive mobile landscape and threaten other providers’ access to spectrum and content resources. The FCC cannot responsibly conclude that this data represents a competitive market without trivialising the significant contributions rural and regional carriers make to their communities every day.”
Overall, it appears the FCC left some significant data points – and industry voices – out of its mobile competition assessment. It remains to be seen, though, how much the report will impact the industry going forward.
Rumours continue to swirl of a merger which would reduce the current four carrier field to a three player game and eliminate at least one of the major disruptive forces in the US market. It’s possible the report could be used as evidence to demonstrate the merger will not cause harm to consumers.
If it is, and if the deal manages to sneak through review, it will surely be interesting to see what next year’s competition report looks like.
The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.