Tuesday, July 19, 2011
Number Counting as a Measurement of Wireless Competition
Advocates for deregulation often use a simple measure as the primary basis for claiming a particular marketplace operates competitively. They count the number of operators, both facilities-based and resellers. So if there are four wireless carriers in most of America, it stands to reason that the market operates competitively, right?
In reality, we need a little more than number counting. Do these ventures offer different services, at different prices? One could count into the hundreds the number of gas stations in a locality, but these ventures offer fungible (substitutable) products typically at the same price. Gas rises or falls in my community when the price setter, a major regional chain, decides to act. Every other gas station operator follows as “price takers.” Are they competing? Certainly not on price.
There surely are four major wireless carriers in most U.S. cities, but they rarely compete on price. Shiny new handsets, yes, but the price points of the four carriers remain almost lock step the same. When has any carrier announce a sale? Why do all four carriers have the same minutes of use baskets, starting at 450 minutes? What discount can one get if they eschew a subsidized handset? The little price competition that exists comes from T. Mobile and Sprint, one of which may evaporate soon.
Of course ventures can compete on factors other than price, but an analysis of the wireless marketplace requires more than a glib reference to the number of operators. The FCC’s last two wireless competition reports (see http://wireless.fcc.gov/index.htm?job=cmrs_reports) try to make a more nuanced, granular and sophisticated analysis. Stakeholders who want you to believe the wireless marketplace is “robustly” competitive scoff at such an exercise.