FCC Commissioners Spar Over Wireless Competition

How competitive is the wireless industry? It really depends who you ask.

Members of the Federal Communications Commission approved the agency's 14th annual report on the state of competition in the sector. But in remarks at Thursday's monthly meeting, the commissioners made it plain that there are wide gulfs in their assessments of the wireless industry.

"All of the findings of this report are not comforting. Some are down right sobering, and worrying, too," Commissioner Michael Copps, a Democrat, said during the meeting. "Specifically, the report confirms something that I have been warning about for years: That competition has been dramatically eroded and is seriously endangered by continuing consolidation and concentration in our wireless markets."

But the Republican commissioners had a markedly different interpretation of the report's findings, highlighting the hefty capital expenditures the carriers have reported and several data points indicating that large majorities of consumers have their choice of multiple mobile voice and broadband providers.

"If nothing else, the report shows that the wireless sector is dynamic and ever improving and responsive to consumer demand," said Commissioner Robert McDowell, warning that it "appears to lay the foundation for more regulation."

CTIA, the principal trade association representing the wireless industry, echoed those concerns.

"We are very concerned...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," CTIA President and CEO Steve Largent said in a statement.

Today's report, which evaluates the state of the wireless market in 2008 and much of 2009, is one of several congressionally mandated competition assessments, and figures to serve as a framework for the policy work the FCC will pursue in the industry over the coming year, particularly when it comes to the evaluation of any mergers in the sector.

The FCC approved the report with affirmative votes from the three Democratic commissioners and concurring votes from the two Republicans, who objected that the annual report, for the first time in years, did not reach the express conclusion that there is effective competition in the industry.

Ruth Milkman, the chief of the FCC's Wireless Telecommunications Bureau, explained that the report departed from previous years' analyses by broadening its scope to focus on the entirety of the mobile ecosystem, including devices, infrastructure, spectrum and other issues that relate to competition. Under the new approach, the staff opted to refrain from including sweeping conclusions in this year's report.

"What we set out to do when we started drafting this report was to collect the facts and to analyze them," Milkman said. "We wanted to expand the report. We wanted to cover these areas in greater depth -- we wanted to slice and dice the data in ways that hadn't been done before. But we were focusing on the data and the analysis rather than on the conclusions, so we thought we would just lay out for the commissioners all the data and analysis and stop there."

For Largent, that explanation fell short.

"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," he said.

The commissioners seized on different data points to draw their own conclusions about competition in the wireless market. McDowell and fellow Republican Commissioner Meredith Baker cited the report's finding that more than 91 percent of Americans have the choice of at least four wireless providers, while nearly 99 percent are served by at least two.

The report also found that 76 percent of households have access to at least three mobile broadband providers, up from the figure of 51 percent reported in last year's evaluation.

McDowell argued that those figures should give the FCC pause before embarking on regulatory inquiries such as the "bill shock" probe opened last week asking for comments on new rules to alert subscribers when they are racking uplarge data or text charges.

"These numbers illustrate that the vast majority of consumers have a meaningful opportunity to change providers if they cannot withstand a bill shock or are unhappy with their mobile broadband experience," McDowell said.

Critics have countered that even if consumers have access to multiple providers, that choice is less meaningful in light of industry practices such as early termination fees that penalize subscribers for switching carriers before their contract expires and exclusive deals between carriers and device makers that limit the availability of the hottest new smartphones to a single network.

Copps took a different approach, pointing to the wireless sector's score on the Herfindahl-Hirschman Index, a widely used measure of competition within an industry that evaluates market concentration by squaring the share of each firm and adding the figures. The wireless sector's score of 2848, Copps said, represents an increase of nearly 700 points since the FCC first began applying the metric to the wireless sector seven years ago.

"Without denying all those things that are right in the wireless world, and there are many, the facts also tell us that some things are not so right," Copps said.

Kenneth Corbin is an associate editor at InternetNews.com, the news service of Internet.com, the news network for technology professionals.

TAGS:

wireless, FCC, mobile broadband, CTIA, competition

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