4 or 3: the Most Important Number in the Mobile Business

The most important numbers in the global mobile service provider business are "three" and "four." The reason is that national communication regulators generally have held that four contestants is the minimum necessary to provide the benefits of competition for consumers. 

But in most markets, over the next half decade, there is likely to be significant consolidation in the mobile business, with many markets moving from four providers to three suppliers. That will be a serious issue for most regulators.

Hutchison Whampoa Limited, for example, wants to buyTelefonica's 02 Ireland unit.

The acquisition would quadruple the market share of Hutchison's subsidiary, 3 Ireland, to 37.5 percent, behind market leader Vodafone.

The European Commission already has said it is concerned about a reduction of competition in Ireland, as the deal will cut the number of mobile phone operators from four to three. That was an issue Hutchison faced in its acquisition of Orange Austria in 2013 as well. 

Whether four competitors actually works "better" for consumers than three competitors remains to be seen. There are any number of inputs that collectively represent better consumer outcomes. 

Lower prices, innovative services and devices, higher speeds, more and better applications, many ways to buy and use, and more robust service all are parts of the value competition is supposed to deliver. 

You might instinctively argue that four competitors leads to lower prices, and that likely is generally true, at least in the short term. What is less certain is the longevity of such price benefits, over the long term, if the smaller contestants cannot stay in business. 

And that's the long term issue: capital intensive businesses might require high levels of investment on a continuous basis that a small competitor, competing on price, simply cannot afford to make. In that case, consumer benefit is less than it might otherwise be. 

Many observers might point to the inter-modal competition between cable TV operators and telcos as an example of significant competition and consumer benefits even when there are only two providers in a capital-intensive business. 

Others might counter that the history of intra-modal competition with just two providers, in the mobile business, suggests clearly sub-optimal benefits for consumers.

So the key question is how widely regulators and anti-trust officials will conclude that reasonable and effective levels of competition can be promoted if a mobile market is lead by three providers, instead of four.