CCA Clashes with AT&T and Verizon on Overall Health of Wireless Marketplace

The next report likely will be released under Tom Wheeler, nominee for chairman, FCC officials say. Under Julius Genachowski, the FCC changed course over past reports and declined for three years in a row to find the industry “effectively competitive.” In each of those years, commission Republicans sharply criticized the reticence of the Democratic majority.

"Unfortunately, despite the past success of the Commission’s regulatory framework in promoting wireless competition, the wireless industry once again has reverted to a virtual duopoly, dominated by AT&T and Verizon,” CCA said (http://bit.ly/18W6cA9). “A spate of acquisitions by the Twin Bells in recent years has robbed the wireless marketplace of its former vibrancy.” CCA noted Cingular’s acquisition of AT&T Wireless in 2004, AT&T’s acquisition of Dobson in 2007, Verizon’s acquisition of Alltel in 2008 and AT&T’s buy of Centennial in 2009.

"AT&T and Verizon not only have acquired smaller rivals but have engaged in significant spectrum-only transactions that have strengthened their position vis-à-vis competitive carriers,” CCA added. “These transactions include Verizon’s 2012 acquisition of AWS-1 licenses from SpectrumCo and Cox, and AT&T’s 2011 acquisition of Qualcomm’s nationwide Lower 700 MHz downlink spectrum and 2012 acquisition of NextWave Wireless and its substantial WCS and AWS spectrum holdings. Most recently, AT&T and Verizon have proposed a massive swap of licenses among themselves, which poses several threats to competition."

Verizon Wireless countered with a 75-page filing saying the market is “robustly competitive,” U.S. consumers have a broad choice of devices and can buy services from traditional carriers or “from a large and increasing variety of device and application suppliers, resellers, over-the-top providers, and other entrants across the mobile ecosystem.” The FCC should find that the market is competitive, Verizon said. “In today’s U.S. mobile market, output is increasing, prices are decreasing, and there is massive, ongoing investment and innovation,” the carrier said (http://bit.ly/11MekdX). “Competitive forces now come not just from mobile carriers but from devices, applications, over-the-top providers, and other non-traditional sectors across the mobile ecosystem, enabling consumers to ‘mix-and-match’ services or applications that are both complements and substitutes.”

The FCC’s 16th wireless competition report, released in March, “was filled with extensive data unequivocally demonstrating that the wireless mobile marketplace is not only ‘effectively’ but intensely competitive,” AT&T said. “Innovation and investment continued to skyrocket, even as the economy struggled to pull itself out of recession; consumer choices remained robust, not only among service providers, but also among handsets and service plans; and consumers are getting more ‘bang for their buck’ than ever before as unit prices continue to fall.” While the FCC “declined explicitly to address whether this evidence shows that there is effective competition, that evidence is overwhelming and speaks for itself,” AT&T said (http://bit.ly/14HYq8s).

The U.S. wireless market is competitive, but competition is at risk, Sprint Nextel said. “AT&T and Verizon together account for approximately 2/3 of the wireless market, as measured by customers and revenues: as of June 2012, their combined 199.4 million wireless customers were an estimated 62 percent of the U.S. wireless market, and their combined wireless revenues for January-June 2012 were an estimated 68 percent of the total wireless market,” said Sprint, the third-largest wireless carrier (http://bit.ly/11MlsHe). Sprint said because AT&T and Verizon are also major wireline players they “control bottleneck facilities that are critical to the provision of wireless service, and which receive hundreds of millions of dollars in high-cost USF support.” Sprint said “excessively priced special access backhaul” in particular “remains a serious competitive roadblock.”

The Telecommunications Industry Association and Mobile Future both filed comments saying the industry is competitive. TIA said the wireless industry spent by its count $272.3 billion on infrastructure buildout and equipment in 2012 (http://bit.ly/1294NMO). The device market is also highly competitive, TIA said. “Smartphone unit sales doubled between 2010 and 2012,” the group said. “We expect that by 2016, nearly 94 percent of handset unit sales will be smartphones, rising to 183 million from 108.4 million in 2012, a 14.0 percent compound annual increase.” “America’s wireless consumers today benefit from one of the most dynamically competitive sectors in our nation’s economy,” Mobile Future said (http://bit.ly/11J9sFu). “As previous Commissioners have concluded and as market realities clearly show, the wireless market in our nation is effectively competitive, and the Commission should embrace the data and trends and recognize this fact."

"The wireless infrastructure industry is more competitive than ever, fostering high levels of private capital investment and new technological innovation that, in turn, is utilized by consumers and businesses that rely on mobile broadband,” PCIA said (http://bit.ly/11J9LjC). “Today, more than thirty-five percent of the people in the United States have cut the cord in their homes and rely solely on their wireless connections. Wireless infrastructure has enabled that shift, and will become even more critical as wireless devices continue to migrate in-building."

The wireless market is highly competitive, but challenges remain, CTIA said (http://bit.ly/14I5vWI). The biggest is an “imminent shortfall of usable licensed mobile spectrum,” CTIA said. “As wireless adoption increases and mobile data usage explodes, much more bandwidth is needed to upgrade networks, serve additional consumers, and meet demand.”