FCC Should Find Wireless Industry Competitive, CTIA Says

“We've all seen this farce before and we all know how it will end -- the FCC will pretend to examine the market carefully, only to conclude yet again there's inadequate competition,” said Berin Szoka, president of TechFreedom. “If the data don't quite tell the story the FCC wants, it will simply raise the bar, just as it redefined 'broadband' to downplay growing competition with cable.” There are a lot of dimensions to quality of service in the mobile arena and that gives the FCC room to maneuver, Szoka said: “The FCC will offer a report that matches its policy agenda," including “preserving four nationwide carriers by any means necessary, including huge giveaways of spectrum to T-Mobile and Sprint, and even barring the two from merging, even though that could create a much stronger competitor to Verizon and AT&T.”

"I doubt the FCC will change the position it has consistently taken under the Obama administration and make a proper effective competition finding,” said Randolph May, Free State Foundation president. "I hold out hope that the 'facts on the ground' will overcome the ideological predisposition to ignore competitive realities.”

Center for Boundless Innovation in Technology Executive Director Fred Campbell questioned FCC arguments that the wireless market is too complex to determine whether there's effective competition. “Congress adopted a bright-line standard for effective competition in the cable context, and the European Union regularly makes effective competition findings using a three-part test to determine whether regulation is warranted in particular communications markets,” said Campbell. “Given the views of Congress and the EU on this issue, it’s more rational to assume the FCC has refused to make effective competition findings in order to increase its regulatory flexibility.”

Robert McDowell objected as an FCC commissioner to reports that didn't conclude there was effective competition in the wireless industry. "The report should conclude that it's a terrific time to be a wireless consumer, because that's the market reality,” said McDowell, now at Wiley Rein. “Prices are falling. Spending on consumer advertising and customer acquisition is rising. [Early termination fees] have become a relic of the past. Smaller carriers are seeing their market share increase. Mobile broadband speeds are accelerating. The American market for value-added features and apps continues to lead the world and is exploding beautifully.” All those factors should be seen as signs the market is “fiercely competitive,” he said.

“The FCC has a conflict of interest with a finding of competitiveness -- if the market is competitive, the FCC’s power to intervene is reduced,” said Richard Bennett, network engineer and visiting fellow at the American Enterprise Institute. “The Obama FCC always protects its institutional interests by finding a need for intervention. T-Mobile’s subscriber growth undercuts this finding all by itself, but the FCC has never been deterred by mere facts.”

Low-Band Spectrum Concerns

Michael Calabrese, director of New America’s Wireless Future Project, countered that there are many signs the industry isn't that competitive. The Justice Department’s Antitrust Division “has told the FCC repeatedly in recent years" that "the wireless industry is very highly concentrated and has become more so every year as regional carriers are rolled up,” Calabrese said. “Further consolidation is more likely than not. Access to TV-quality spectrum puts a ceiling on effective competition and next year’s incentive auction is designed to limit low-band spectrum to three carriers in each market.”

Smaller carriers concede that only providers with 20 MHz or more of low-band spectrum with its superior propagation characteristics “can hope to compete long term,” Calabrese said. “AT&T and Verizon have no reason to match price cuts by T-Mobile and smaller carriers because they know that the most profitable customers want reliable in-building and rural coverage that other carriers won't be able to match without TV-quality spectrum.”

Matt Wood, Free Press policy director, conceded that the wireless market has become more competitive in recent years. “That's not in spite of the FCC, but in fact because of the steps that antitrust and communications authorities took to block the AT&T/T-Mobile deal, promote device interoperability and data roaming, and restore basic rights to open and nondiscriminatory mobile broadband access,” Wood said. Much remains to be done, he said. “T-Mobile, Sprint and smaller carriers today are competing vigorously with each other,” he said. “But can they today, and will they in the future be able to discipline the prices and behaviors of the Verizon/AT&T duopoly? Or will all of these smaller competitors just be fighting over table scraps?”

CTIA offered 85 pages of data and arguments for the FCC. CTIA pointed to various indicators of a competitive market, saying carriers invested more than $32 billion in their networks last year. “The wireless industry has been aggressively deploying LTE: today, fully 98 percent of Americans have access to 4G LTE networks and there are 158 million LTE connections for the country’s population of 318 million,” the association said. “The data and developments discussed herein can only stem from a truly competitive marketplace.”

AT&T said the wireless market is “extremely competitive” and over the past year “competition has gone into overdrive.” Competition in the market led to a 8.9 percent drop in industry postpaid average revenue per unit (ARPU) in Q1, AT&T noted, citing a UBS report. “The Commission can no longer turn a blind eye to these developments in order to expand its regulatory powers,” AT&T said. “The wireless marketplace is effectively competitive and, indeed, more fiercely competitive than ever. A candid Report to Congress would recognize that.”

Mobile Future said at least 40 U.S. providers now offer 4G LTE service. “Ongoing price wars have delivered fresh offerings from data rollover plans to contract buyouts and other customer enticements,” the group said. “And competition is coming from an exciting and unexpected range of new entrants -- and new sectors.”

FSF said in its comments the competition report has to be seen as having major implications should monopolistic markets are regulated differently that vibrantly competitive markets. “Congress intended for the Commission’s report to supply the factual foundation and analytical basis for proper regulatory policy -- which, in this instance, means light-touch regulation that matches the demonstrably competitive conditions of the market,” the foundation said.

CCA Counters CTIA

Some industry commenters weighed in against a finding of effective competition, including the Competitive Carriers Association, which shares many members with CTIA. CCA said the FCC should find instead that the industry is “not effectively competitive.” The scarcity of spectrum works against better competition, CCA said. “The proliferation of bandwidth-intensive applications and explosive user demands has strained spectrum resources considerably.”

The FCC could take steps that would make wireless more competitive, CCA said. In light of the February net neutrality order, it should initiate a proceeding to look at competitive carriers’ ability to access voice and data roaming agreements, CCA said. It said the agency should “act now to help implement non-geographic number portability” and “monitor the evolution of standards as new wireless technologies emerge to ensure that competitive carriers are not precluded from obtaining interoperable devices.” Forward-looking reforms to the USF program “that provide sufficient support so that rural populations and low-income consumers can access the services they need” also would help, CCA said.

CCA member Sprint said the market is competitive, but problems remain. “Serious distortions exist at the wholesale level, particularly in the provision of special and broadband access, and continue to affect competition at the retail level,” Sprint said. FCC high-cost USF policies favor incumbent wireline carriers, Sprint said. “The lack of access to critical low-band spectrum threatens to undermine the ability of smaller carriers to continue to compete with the two dominant wireless providers.”