That line of thinking might obviously include Sprint merging with T-Mobile USA, as difficult as that might be, for reasons of incompatible air interfaces, at least until Long Term Evolution displaces much of the legacy air interface (CDMA and GSM).
"I actually believe that Washington would be receptive to consolidation to provide more balance to the big two," he said. Others might not be so sure. A big issue when the AT&T purchase of T-Mobile USA was considered was the degree of competition in the U.S. mobile market.
To be sure, there remains continuing sentiment that the U.S. mobile market is not "stable" over the long term.
Is the share of market now characteristic of the U.S. market sustainable? Many would say "no." Among the common observations is that two of the top four national providers have market share two to three times greater than two of the others.
Many observers would say a market with four national providers is about one too many for a sustainable and stable market. But even without more merger activity among any of the top four providers, will any single U.S. provider be allowed to gain 50-percent market share?
In principle, one is tempted to say "yes." But regulatory intervention to prevent such an outcome probably would happen before that happened.
Some observers think the U.S. mobile market already has become substantially non-competitive.
The Department of Justice, for example, recently opposed the acquisition of T-Mobile USA by AT&T, citing a standard methodology for determining the competitiveness of markets.
One of the ways to measure market concentration is the Heffindahl-Hirshman Index or HHI, often used as a measure of market concentration. The HHI is the square of the percentage market share of each firm summed over the largest 50 firms in a market. Here is the pre-merger market HHI which already suggests that the market is uncompetitive. HHI is the problem
For some of us who just want a quick rule of thumb that tells you when there is potential antitrust concern, 30 percent market share tends to work.That has been the figure cable TV executives in the United States have worried about, and which the Federal Communication Commission at one point set as the limit of subscriber market share for any U.S. cable operator. Both AT&T and Verizon Wireless already have market share that exceeds that figure.
The Justice Department will generally investigate any merger of firms in a market where the HHI exceeds 1,000 and will very likely challenge any merger if the HHI is greater than 1,800. With a HHI over 2,300 any deal will be heavily scrutinized and most likely rejected. Even a merger between T-Mobile USA and Sprint, with a resulting 28 percent market share, would probably not be allowed on the same antitrust grounds.
The competitive equilibrium point in the mobile industry seems to when the market shares of the top three providers are 46 percent, 29 percent and 18 percent, argues Chetan Sharma says. In any country, that "rule of three" seems to hold.
That roughly corresponds with a rule of thumb some of us learned about stable markets. The rule is that the top provider has twice the market share of the contestant in second place, while the number-two provider has about twice the market share of the number-three provider.
That suggests the U.S. mobile market still has room to change. At the moment, Verizon Wireless has perhaps 34 percent share, while AT&T has about 31 percent share. Classic theory would suggest the ultimate market share could approach a market with the top-three providers having a market share relationship something like 50:25:12.
That would have highly-significant implications for the four current providers that today represent 93 percent of all subscribers. One of the leading contestants reasonably could hope to grab half of the available market, while two of the contestants could face significant losses.
All that assumes regulatory action did not occur before that market structure was obtained, though.
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