While couched in noble terms of
promoting competition, innovation and freedom, the FCC soon will combine two initiatives
that will enhance the likelihood that Sprint and TMobile will stop operating as
separate companies within 18 months. In
the same manner at the regulatory approval of airline mergers, the FCC will
make all sorts of conclusions sorely lacking empirical evidence and common
sense.
FCC
Chairman Pai’s game plan starts with a report to Congress that the wireless
marketplace is robustly competitive. The
Commission can then leverage its marketplace assessment to conclude that even a
further concentration in an already massively concentrated industry will not
matter. Virtually overnight, the remaining firms will have far less incentives
to enhance the value proposition for subscribers as TMobile and Sprint have
done much to the chagrin of their larger, innovation-free competitors AT&T
and Verizon who control over 67% of the market and serve about 275 million of
the nation’s 405 million subscribers.
Like
so many predecessors of both political parties, Chairman Pai will overplay his
hand and distort markets by reducing competition and innovation much to the
detriment of consumers. He can get away
with this strategy if reviewing courts fail to apply the rule of law and reject
results-driven decision making that lacks unimpeachable evidence supporting the
harm free consolidation of the wireless marketplace. Adding to the likely of successful overreach,
is the possibility of a muted response in the court of public opinion.
So
how will the Pai strategy play out?
First, the FCC soon will invite interested parties to provide evidence
supporting or opposing a stated intent to deem the wireless marketplace
sufficiently accessible and affordable throughout the nation. The FCC has lots of evidence to support its
conclusion, but plenty of countervailing and inconvenient facts warrant a
conditional conclusion, particularly in light of future market consolidation. Wireless carriers have invested billions in
network infrastructure and spectrum.
Rates have significantly declined as the industry has acquired scale and
near full market penetration. Bear in
mind that all of this success has occurred despite, or possibly because of a
federal law requiring the FCC to treat wireless carriers as public utility
telephone companies. Congress opted to
treat wireless telephone service as common carriage, not because of market dominance,
but because it wanted to maintain regulatory parity with wireline telephone
service as well as apply essential consumer safeguards.
How
ironic—perhaps hypocritical—of Chairman Pai and others who surely know better to characterize this responsibility as the
product of overzealous FCC regulation that has severely disrupted and harmed ventures
providing wireless services. Just how
has common carrier regulation created investment disincentives for wireless
carriers when operating as telephone companies?
Put another way, how would removal of the consumer safeguards built into
congressionally-mandated regulatory safeguards unleash more capital investment,
innovation and competitive juices?
U.S.
wireless carriers regularly report robust earning and average revenue per user
that rival any carrier worldwide. Of
course industry consolidation would further improve margins while relaxation of
network neutrality and privacy protection safeguards would create new profit
centers. TMobile shareholders get a big
payout, while the remaining carriers breath a sigh of relief that their
exhaustively competitive days are over.
Will
the court of public opinion detect and reject the FCC’s bogus conclusion that common
carrier regulation has thwarted wireless investment and innovation? That requires a lot of vigilance and memories
of the bad old days when no carrier opted to play the role of maverick
innovator and marketplace disrupter.
With TMobile or Sprint merged or acquired, the remaining ventures have
ever more incentives not to spend sleepless afternoons competing and devising
new ways to stimulate customer interest in changing carriers. TMobile and Sprint have offered just about
every value enhancement in recent years such as carry forward minutes, reduced
roaming charges, unlimited service, new bundles and use your own device at much
lower monthly rates. Would these options
exist if only three carriers served 95% of the market?
If
you think the recent spate of airline mergers has enhanced competition and the
air travel experience, then a wireless marketplace with 3 national carriers
will work out just peachy.
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