FCC Wireless Competition Report is Inconclusive, Sort Of

The Federal Communications Commission’s 15th “Annual Report and Analysis of Competitive Market Conditions With Respect to Mobile Wireless, Including Commercial Mobile Services  makes no formal finding as to whether there is, or is not, effective competition in the industry” actually reaches no stated conclusion on the U.S. wireless market, in terms of effective competition, a surprise to some observers, who had predicted that the FCC report would declare the U.S. market “not competitive” in some substantial respects.

On the other hand, one standard test of industry concentration shows a "high degree of concentration." But many observers would simply ask what other state of affairs could possibly be the case.

The report does use the “Herfindahl-Hirschman Index,” (HHI), which is calculated by summing the squared market shares of all firms in any given market, and is a commonly used measure of industry concentration.

Antitrust authorities in the United States generally classify markets into three types: Unconcentrated (HHI < 1500), Moderately Concentrated (1500 < HHI < 2500), and Highly Concentrated (HHI > 2500).


In the mobile wireless services industry, the weighted average of HHIs (weighted by population across the 172 Economic Areas in the United States) was 2811 at the end of 2009, compared to 2842 at the end of 2008.


By that measure, the U.S. wireless market is “highly concentrated.” But observers will argue about what that means. Access services of any type are “highly concentrated” in almost every market, in the sense that there are typically two dominant wired providers.


Wireless markets typically have more providers than that, but even wireless is “highly concentrated.” Whether access markets, wireless or wireline, can be anything but highly concentrated seems to be the issue. There is a good reason why access markets traditionally have been “monopoly” markets. Until recently, it was thought impossible to have facilities-based competition in access markets.


In fact, in most markets globally, that will still generally be the case. Hence we see wholesale networks being built in several countries, the theory being that markets will not support more than one optical access network.


So you can draw your own conclusions. The report does not specifically say the the U.S. wireless market is uncompetitive. The HHI test would suggest the market is highly concentrated, though.


And many would say there is virtually no possibility of any other outcome in the access business. That is why wholesale-only optical access networks are being built in New Zealand, Australia and already is available in Singapore. In other words, traditional tests of market concentration always are difficult to apply in the access business, since there probably is only room for a small number of facilities-based providers, in any scenario.
Mobile voice coverage would not strike most observers as being anything but competitive. The report states that 89.6 percent of consumers can buy service from five or more suppliers, for example. To be sure, the number of competitors is higher, across the board, in more-populated areas, as you would expect.

Wireless broadband coverage is relatively consistent with the voice findings, as 68 percent of U.S. consumers have a choice of four or more providers. The caveat is that the. competition is mostly confined to more-densely-populated areas, again as you would expect. Rural consumers clearly do not have as many choices.