By Chris McGovern, Manager of Research Development for Connected Nation
The Federal Communications Commission (FCC) just released its 15th Annual Mobile Wireless Competition Report. A lot of people have been waiting with bated breath for this report to be made public, some looking for a stamp of approval for provider activities (like changes in price models and mergers) while others were hoping the report would portray wireless providers as robber barons that have successfully quashed all competition. This 308-page behemoth, though, paints a more complicated picture of a mobile wireless environment where both successes and reasons for concern can be found.
According to the report, about 92% of Americans (or about 262 million people) can choose from two or more mobile broadband providers, but fewer than seven out of ten (67.8%, or about 193 million people) have four or more mobile broadband choices. There is also a rural/urban divide, as only 69% of rural residents have two or more mobile broadband choices, and only 17.3% of rural residents have four or more options. In fact, a measurement of market concentration (the Herfindahl-Hirschman Index, or HHI) finds that the wireless market is “Highly Concentrated,” with four major national providers serving over 90 percent of the nation’s mobile wireless subscribers.
Yet not all is gloom and doom. As the FCC report points out, measures of concentration are not necessarily synonymous with a non-competitive market. It turns out the United States is following a global pattern, as mobile markets in many industrialized nations have just 3-4 major providers each. In the U.S. there is little variance in competition between census tracts with different median household incomes; tracts whose median household incomes are below $25,000 have an average of 3.3 mobile broadband providers, compared to 3.7 providers in tracts with median household incomes of $150,000 or more. The consumer price index (CPI) for the cellular market has decreased or remained the same every year since 1999, while the CPI for all goods and services has increased every year but one during that time period. In addition, mobile broadband providers show evidence of both price and non-price competition, a sign of healthy competition between carriers.
I suspect that in the end everyone will pick and choose some data out of this report, depending on the argument they want to make. Are there indicators that mobile competition can be improved upon? Yes, there are. Is there evidence that points to a competitive mobile market? That’s in there, too. Does this report show a market that is too complicated to resort to bumper sticker competitive analysis? Most definitely.
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