Mobile Market Shifting

Market economies work because consumers vote with their wallets to buy the better products from the better suppliers. That is less true where markets are more managed, but the principle remains. But the logical end result of market economies is that, sooner or later, companies selling products with less demand will go out of business, while companies selling products with higher demand will grow. 

Sooner or later that tends to lead to market concentration, with the inevitable result, at least historically in the United States, for anti-trust actions to reset the playing field. But no amount of anti-trust regulation will stop the process from reoccurring. People are going to buy more of the products they think are best; allowing those companies to grow larger; while other companies disappear, leading to yet another cycle of anti-trust action.

Very few observers would probably think the U.S. communications market is so concentrated--again--that something drastic has to be done. Nor is it clear precisely how many effective competitors must exist in a single market to provide the benefits of competition. Some say three contestants is enough. Some argue for more; in some cases as few as two might provide meaningful competition, some economists argue.

We might be seeing some sort of a tipping point in the U.S. wireless market, though nearly all observers would argue that the U.S. wireless market remains highly competitive. An example: third quarter financial results.

Verizon Wireless and AT&T Mobility continue to perform well and pull further ahead of their competitors in the U.S. mobile business, says  Susan Welsh de Grimaldo, Strategy Analytics analyst.

Sprint Nextel continues to bleed subscribers, losing more than a million in the quarter. The company lost 1.3 million subscribers in the third quarter while AT&T Wireless gained two million and and Verizon Wireless gained 1.5 million.

Sprint's customer numbers have declined by a further 6.3 percent over the past 12 months while U.S. mobile subscriber numbers increased by seven percent over the same period.

One can argue the AT&T iPhone is responsible, that continuing customer service at Sprint or Nextel is responsible, that Verizon bundling capabilities are contributing, Sprint's failure to come up with a winning alternative to the iPhone, continued trouble at Nextel or some other combination of circumstances are responsible for Sprint's continuing slide. 

Nor is it clear whether Sprint can stabilize and then counterattack. On a value for money basis, it is hard to argue with Sprint's "Simply Everything" packaging, for example. But even that seems not to have halted the erosion. 

To be sure, the top of the U.S. mobile market has been relatively stable, in terms of market share, for some time. What appears to be happening now, though, is a destabilization of the market, with AT&T and Verizon gaining, while T-Mobile and Sprint are in flux. T-Mobile now is a relatively-distant fourth, but that could change over the next few years if Sprint cannot halt its slide.