The State of Wireless Competition

December 19, 2014

For the past eighteen years, by Congressional mandate, our nation’s communications regulators have been required to produce an objective report assessing the state of wireless competition in our nation.   For most of these annual reports, through both Democratic and Republican Administrations, the FCC has concluded what most Americans who own a smart phone, tablet, or phablet know to be true:  that mobile competition in the US has been white hot.

This competitiveness is even more evident in today’s wireless marketplace.  Countless news stories in the past few months proclaiming thriving competition, and barrage of holiday advertising from market rivals, the day-to-day reality of the U.S. wireless marketplace is in plain view to U.S. mobile consumers: there is an intense rivalry for every wireless dollar. A few examples of recent headlines that offer a good snapshot of todays market include: Consumers Win as Carriers Fight for Your Business; Mobile Wars: AT&T Goes Whale Hunting but Verizon and Sprint Bite Back as Data Prices Continue to Fall; and T-Mobile US Smells Blood in the Water, Increases Competitive Pressure.

Unfortunately, in the past few years, the Commission has not seem mindful of this competitive reality, including in its most recent wireless competition report published yesterday. This is a shame, for by ignoring this reality – and the underlying facts and data supporting it – the Commission risks calling into question the even-handedness and validity of the its evaluative process.

Consider these facts:

First, competition is the defining reality of the U.S. mobile marketplace. Let’s start where it matters most – consumers’ pocketbooks – from December 2005 to January 2014, the wireless Consumer Price Index fell 10 percent, while the overall CPI for all items increased almost 19 percent. AT&T and Verizon are now offering free additional data with their plans. Sprint is vowing to cut the bills of new subscribers from its market rivals in half. And, T-Mobile now offers family plans with unlimited data starting at $100 a month for two lines and just this week announced it will allow customers to roll over their unused data. That company is reportedly on pace to add between 4.3 million and 4.7 million new customers this year despite the fact that the U.S. market is showing little overall subscriber growth. Also this week, Vodafone announced it will be joining the U.S. mobile fray as an MVNO.

As the Commission’s last competition report, issued in March 2013, noted, more than nine out of ten of Americans can choose from at least three wireless broadband service providers and today there are at least forty 4G LTE service providers competing for U.S. customers.

Second, wireless connectivity – and the competition stoking it – is improving virtually every aspect of our lives—from how we learn to how we manage our health and connect our lives. In the classroom, 73% of middle school and high school teachers are using cellphones for classroom activities. The number of connected digital health trackers sold is currently doubling year over year. And at the end of last year, there were 200 million cellular machine to machine devices in active use and this number is expected to at least triple in the next five years.

Today, the average U.S. household owns 5.2 connected mobile devices, and 97 percent of households have a wireless phone connection. American consumers have at their fingertips more than 1.3 million mobile applications in Apple’s App Store alone, as compared to just 50,000 in 2009.  In terms of mobile Internet usage: last year, 63% of American adults used their wireless device to access the Internet— more than double the percentage who did so in 2009. This demonstrates real progress toward the national goal President Obama laid out in his 2011 State of the Union Address that “within the next five years, we will make it possible for business to deploy the next generation of high-speed wireless coverage to 98% of all Americans.”

Third, intense competition is fueling unprecedented investment in U.S. wireless infrastructure. Last year, U.S. wireless providers invested a record $33 billion. In fact, on the Progressive Policy Institute’s list of 2014 “Investment Heroes,” recognizing companies with the highest levels of domestic capital expenditures, the top two companies are wireless service providers. This record investment from market rivals is the reason that 97% of Americans have access to 4G service, and the U.S. has the world’s largest 4G population—nearly 100 million subscribers and counting.

Here, too, the U.S. is outperforming the world.  Between 2007 and 2010, U.S. wireless carriers invested 42 percent more into capital expenditures than the five largest EU countries combined. And, between 2010 and 2013, U.S. capital expenditures were 73 percent more than the top five EU countries. This is particularly good news in a country where our wireless consumers use five times more voice, twice as much data, with 30% faster data speeds than their counterparts in the EU, sharpening our competitive edge.

Fourth, the biggest threat to wireless innovation and competition is expanded government intervention.  Rules that limit companies’ abilities to acquire spectrum to serve their customers, or tilt the playing field to favor one competitor over another, limit mobile innovation and chill investment.  Similarly, rules that undermine the incentives for all providers to invest in infrastructure threaten the American mobile success story.  Many countries have experimented with these types of preferential industrial policies in the name of promoting “competition,” but what they have gotten is markets typified by fewer providers, less investment and less innovation.  America’s competitive mobile sector did not happen by accident. This vibrant, consumer-driven market reflects wise choices by bipartisan leaders to acknowledge wireless market competitiveness and intervene only in cases of market failure.

This history of success is not just reflected in marketplace facts but also in consumer attitudes.  In a recent nationwide survey of U.S. wireless consumers, only 8% said they believe more regulation will speed the arrival of new products, apps and service choices. By contrast, a full 90% said they believe today’s level of regulation or less would be best for innovation and consumer choice. This should come as no surprise given the fact that more than 94% of U.S. consumers report being satisfied or very satisfied with their wireless service.

The U.S. wireless marketplace today is unquestionably competitive.  Not to acknowledge this fact in the Commission’s annual report is specious.  Going forward, I hope the Commission’s leadership will base the next required competition report more on the facts as they are, and less on how they wish them to be.