Swinging for the Fence or Hitting Singles?—How AT&T and Verizon Further Consolidated the Wireless Marketplace While Most Weren’t Looking

       Before anyone claims victory for the consumer in AT&T’s abandonment of its “swinging for the fence” gambit to buy T-Mobile’s market share and spectrum, consider what did not make many headlines this week.  Both AT&T and Verizon substantially shored up their spectrum stocks with major deals with Qualcomm and several cable companies respectively.

       Solid hits for both carriers: not homeruns, but very strategic singles and doubles. 

      What results from these deals?  Well on the positive side the two major carriers have more spectrum to satisfy consumer demand.  On the negative side this spectrum initially was acquired by companies that offered the prospect for more competition.  The competition will not occur, so the incumbents have even less downward rate pressure and the incentive to innovate.

      No one has convinced me that the wireless marketplace in the United States has too many carriers and too much competition.  Quite the contrary.  But no carrier wants to compete with two “too big to fail” giants who have the customer base and spectrum to make quite costly competitive market entry, or even competition by existing carriers.  These barriers to entry solidify incumbent market dominance, something the FCC could have prevented if it had reserved spectrum for new carriers and nondominant existing carriers. 

      This would not “promote competition for competition’s sake.”  Instead it would enable sustainable competition to flourish in much the same way that airport authorities do not allow one or two airlines to capture all the landing slots.  Airport authorities have learned the hard way that allowing one carrier to dominate results in higher prices.  While price sensitive customers can vote with their dollars and take alternative transport, or drive to another airport, wireless subscribers have limited options. 

      Might a further consolidation of spectrum—the functional equivalent of landing slots—result in higher prices in the “robustly competitive” U.S. wireless marketplace?

Too Big to Fail Wireless Carriers

   
           Few would dispute that spectrum has played a key role in making it possible for AT&T and Verizon to acquire scale economies. These carriers, their trade association and sponsored researchers are very adept at reminding us how scale can translate into a win/win situation for the carrier and its consumers.  I readily acknowledge that if you have a super-size demand for wireless service, U.S. wireless carriers can offer you the lowest per unit rates in the world.  Of course this all you can eat pricing model does not apply to data of course which now has caps to prevent spectrum hogging. 

            But there is a down side: in their quest for scale, the big two carriers can make ever stronger arguments that they are too big to fair with failure defined as not having enough spectrum to satisfy demand the carriers stimulated.  So even if AT&T did not have the spectrum, tower sites and switching capability to handle all the I-phone data traffic in some locations, it’s the FCC’s fault that AT&T did not have enough spectrum to satisfy demand.

            So with the demise of the AT&T acquisition of T-Mobile expect to hear AT&T continue to whine about a spectrum failure.  And expect the FCC to accommodate the big two wireless carriers’ spectrum need even if in doing so the Commission contributes to further market consolidation.

            I wonder what might have happened if the FCC had retained a spectrum cap.  Might more carriers—and even specialized carriers—have entered the marketplace?  How about the prospect of a data only carrier with less total spectrum available to it, but more spectrum allocated for data service?  The U.K. opted to reserve new spectrum for market entrants. 

            It will interesting to see whether in the United Kingdom too big to fail major carriers whine, or have to compete more vigorously as a result.

It’s Still THE Phone Company—Verizon Cuts Off Essential Long Distance Access to My 85 Year Old Mother!!!

            In the no good deed goes unpunished, consider this classic phone company hassle.

           

            I’m currently in Norfolk, Virginia to check in on my ailing Mom.  I also checked her phone bill and noticed she was paying for a bogus $2.49 broadband modem maintenance fee and $5 more than a bundled local phone plus broadband rate.  So I called Verizon.

            First I learned of a classic “Bait and switch.”  The bundled local phone plus broadband rate does not work for any wireline phone subscription, despite language on the Verizon web site implying that any local phone rate so qualifies.  Okay, so I find out that even with the now higher local wireline service rate my Mom would save about $5 by bundling and now qualifying for lower a broadband service rate.  I authorize the switch.

            The switch over provides access to 3 custom calling features like Caller ID.  But the switch inexplicably eliminated the presubscriptions to my Mom’s intra-LATA and inter-LATA long distance carrier.  Gee how inconvenient; how anticompetitive.  The Verizon rep never got the training—or thought to mention—that the upgrade in service somehow implicates long distance presubscriptions.  Of course the logical and practical way would have been to maintain the status quo.  That’s not the Verizon way.  And remarkably the Verizon rep. did not even try to sell Verizon long distance in addition to the soon to be discontinued, but heavily promoted DirecTV and the vastly profitable $4.95 a month wireline maintenance fee.

            So despite taking service for scores of years, my Mother’s upgrade order somehow is treated by Verizon as though she has just begun to take service.  But the Verizon rep does not ask about presubscription and the default position must be “made no long distance carrier selection.”  Therefore my Mother has special local dialing features she won’t use and now cannot make possibly critical long distance calls to family living away from Norfolk. 

Way to go Verizon.  You have put my Mother at some risk, but I don’t live in Norfolk and am scheduled to leave tomorrow.

            What do I learn from this incredible hassle.  Verizon has yet to evolve from the Bellhead, bureaucracy that it has always been.  The repair arm of the company apparently cannot talk to the ordering and billing department.  No one takes ownership of the problem and no one is going to make any effort to resolve the problem, or mitigate the hassle.

            So from this transaction I see Verizon staff as either undertrained or cavalier about following the protocol for handling service UPGRADES from existing customers.  Maybe this shows that Verizon simply does not care about its wireline business with its apparently low margins and needy customers.  It just so happens that my Mother relies on wireline service exclusively; she couldn’t make a wireless call even if she had service.  So Verizon matter of factly disables her lifeline to the rest of the world.

            I will file a formal complaint with the FCC, but I surely cannot expect that bureaucracy to do any better by my Mother and me.