In most fixed network telecom markets, the reality is that only a single facilities supplier is financially sustainable on a national basis, so competition usually takes the form of wholesale obligations. Mobile markets historically have featured at least two to four facilities-based competitors.
But as in the fixed network market, there are questions about sustainable numbers of contestants as the market matures. Over time, fewer competitors are generally expected.
The big issue for regulators is how few competitors are required to provide the benefits of competition, but on a sustainable basis. And that answer is not yet known.
“The idea that the U.S. mobile market has an equilibrium of four firms (nationally, at least) is an emotional and not a scientific conclusion,” said George Ford, Phoenix Center for Advanced Legal and Economic Policy Studies chief economist.
In other words, four national providers might not be sustainable. That view is supported, Ford argues is entirely consistent with the financial struggles of Sprint and T-Mobile US. Even Arcep, the French regulator, now hints that it might allow consolidation in the French mobile market that it long has resisted.
Still, the U.S. Department of Justice said in 2011 that the transition from four to three mobile mobile providers in the U.S. would constitute an unacceptable reduction in the number of competitors.
That combination of AT&T and T-Mobile US would have raised market concentration scores on the Hirschman-Herfindahl Index (HHI) by more than 400 points, a level guaranteed to raise antitrust scrutiny.
Such a score is not an absolute barrier to any particular merger, but places a strong burden on the proponents to show why the merger is not anticompetitive.
Though what is the market? Is not a big question for regulators who will look at the Sprint merger with T-Mobile US, there are going to be bigger questions for some of the other possible mergers, starting with AT&T and Time Warner.
Such foundational questions about the relevant market also are likely to be an issue faced by regulators, if they look at market concentration in application markets lead by the likes of Google, Facebook and Amazon, in the future.