The latest Federal Communications Commission report on the mobile industry in the United States, based on 2015 data that is several years old, shows the need for hard thinking about communications policy.
It is not simply the state of the mobile industry, but the coming changes that will make mobile solutions competitive with fixed network solutions in many (in some cases most) instances. That, in turn, suggests a rethink of fundamental communications policy.
As the business model for fixed networks gets worse (in the consumer space), the business model for mobile--as an access solution--gets better. How much better, compared to fixed, is the real issue.
Some policy advocates reject the notion that mobile is a reasonable and customary replacement for fixed networks. Others would contest such views.
There are many issues:
- Can mobile really be fully effective substitute for fixed network access?
- What will happen in the 5G era, and what will that mean?
- What policies need to be created as landline usage continues to dwindle?
- How much flexibility should “carriers of last resort” have in supplying demand?
- How much demand actually exists for fixed network access?
- How soon could mobile alternatives be viable replacements for fixed access?
One question is whether consumers actually are comfortable with a mobile-only solution to their internet, voice and messaging needs. At a high level, the number of mobile accounts in service is equivalent to the U.S. population, so the notion of full mobile substitution for fixed access seems feasible, if pricing, quality of service and other typical terms of service are equivalent.
Looking only at “human” users, the number of accounts in service is about 324 million, or nearly the population of people older than perhaps 13.
The U.S. population is about 326 million. Retail accounts used by people (not including wholesale lines or connected devices) number about 322 million.
The key point is that consumers broadly have embraced mobility as a preferred solution for their communication requirements. A growing percentage also seem to prefer mobile to such a degree that 58 percent of U.S. children 18 and under live in homes that are mobile-only.
So the notion that mobile can be accepted as a full substitute for fixed network services seems reasonable enough. The political and regulatory issue is whether service providers should be free to use more-affordable, rather than less-affordable platforms, as use of the fixed networks continues to drop.
At the moment, it appears that a typical tier-one service provider--cable or telco--gets about 40 percent to 50 percent take rates (locations that buy service from the provider). By definition, that means stranded assets--facilities that generate no income--range as high as 50 percent to 60 percent. One might argue that is inherently unsustainable.
One possible objection to viewing mobile networks as a potential full substitute for fixed networks is mobile network coverage. That does not seem to be a bigger issue than for fixed network coverage. Also, the mobility market features multiple providers (just how many are sustainable long term is an issue).
The FCC report suggests coverage by three or more competitors is 97.9 percent. Yes, there still are rural areas where coverage might be provided by only a single provider. But we have solutions for such instances. High cost support or universal service funding are the traditional remedies.
One might conclude that mobile platforms actually cannot provide fixed network equivalent service in some two percent of instances. In other cases it might still be possible, given the relative cost of fixed or mobile solutions in rural areas.
One historic problem has been that mobile network internet access speeds have lagged fixed networks.
The FCC report--based on 2015 data--suggests that median downstream speeds per device range from about 10 Mbps to 14 Mbps, on average, enough to support video streaming. Keep in mind that mobile bandwidth is supplied per device, not per location. There is no inherent requirement for sharing that bandwidth across multiple devices.
Also, speeds have increased significantly since 2015, according to Ookla. In the U.S. market, downstream speeds now top 22 Mbps. In fact, speed grew 33 percent, from 2015 to 2016, and another 19 percent from 2016 to 2017, according to Ookla.
In the 5G era, median speeds will climb perhaps an order of magnitude on a median, per-device basis, and as high as a couple orders of magnitude in some locations.
The FCC’s own tests suggest that the the main supplier 4G brands--measured on a “mean” basis--operate even faster than the median speeds, from about 14 Mbps to 19.5 Mbps.
One big issue might concern availability of multiple competitors in low-income areas. That might be a bigger issue in rural areas, compared to urban areas, simply because the cost of mobile infrastructure in urban areas is much lower than in rural areas. According to the FCC data, the number of providers of 4G service, across all income ranges, is at least four in each area.
Such data does not speak directly to the issue of affordability, but one point is that multiple providers operate in areas inhabited by people of all income brackets. In fact, availability to people in the lowest income bracket is higher than in any other income bracket.
So one possible conclusion from the latest FCC report is that the fundamental regulatory policies governing fixed and mobile communications solutions might be in need of a fresh review. “How” service is supplied might need to be reviewed, as it might not make such a difference whether hybrid fiber coax, fiber or copper access platforms, mobile or fixed wireless platforms are used.
Beyond that, there now are strong arguments to be made that former incumbents have lost the ability to shape demand, prices, terms of service and value in communications markets. In some instances, cable TV operators are the leaders. In all cases, mobile now represents a growing and preferred way to use communications.
That suggests the growing possibility that old rules which made sense when there was a true dominant carrier might need to be revisited.
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