About That Second, Third and Fourth Wireless “Attachment”

            There is some good news about the decision by Verizon Wireless to offer shared monthly data plans.  But there could be a lot more if the FCC applied its Carterfone policy.  That policy gave consumers the power to decide what and how many devices to attach to a network connection.  If Carterfone applied, consumers could use multiple devices to access a network subscription, albeit perhaps not at the same time.  Because wireless handsets each have a separate identity, Verizon and soon every other carrier will offer the shared data plan option, albeit at much higher prices factoring in the surcharges for using more than one wireless device.

            Readers over the age of 40 may recall that there was a time when the wireline telephone company totally controlled what devices could connect to the network.  The Bell System had a monopoly on “authorized” handsets and prevented even a used, secondary market for Bell telephones.  Subscribers feared that the Bell System would know whether a non-Bell vintage telephone was in use, when more than one phone was attached.  Carterfone liberated the marketplace for both new and used handsets.

            It is a remarkable time that the Carterfone policy somehow can be converted into “job killing government regulation.”  The policy promotes consumer sovereignty, but in this bizarre time it gets framed as something bad because it requires government to do something.  And what does government do?  It removes the ability of companies to establish bogus regulations designed to preserve a monopoly and maximize profits.  In retrospect it appears crazy that Bell System managers could argue that anytnon-Western Electric telephone could harm the network (and something they called “systemic integrity”) as well as risk the lives of telephone company personnel.  But that strategy lasted for years and preserved incredible profit margins for AT&T.

            History repeats itself.  Verizon surely cannot make a credible argument that allowing multiple devices to share a download basket of capacity triggers greater costs for the company.  Bear in mind that every wireless carrier provides shared access to a basket of voice minutes.  So how is data any different?  It isn’t. 

The lack of Carterfone enforcement means that wireless carriers can create a bogus, new “cost element.”  Because these carriers copy each other (some would say collude), expect every wireless carrier to create a new billing line item for that second, third and fourth device sharing a single monthly throughput allowance.

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.