Communications policy makers long have believed that where facilities-based competition is not possible, a robust wholesale framework is the best alternative. And at least where North America or Europe are concerned, that belief seems justified.
Whether reliance on wholesale or facilities competition is authorized, market share structures tend to be fairly similar: leadership by three firms, corresponding to the rule of three.
“A stable competitive market never has more than three significant competitors, the largest of which has no more than four times the market share of the smallest,” BCG founder Bruce Henderson said in 1976.
Codified as the rule of three, the observations explains the stable competitive market structure that develops over time, in many industries.
That 4:2:1 pattern suggests that the market leader has twice the share of provider number two; which in turn has double the share of provider number three.
In the fixed networks, though we might argue the market share pattern is not yet stable, that suggests a mobile or fixed network market should be led by three firms.
In the French fixed network internet access business, which is largely based on use of wholesale access, share structure is not too dissimilar to that seen in Australia, which uses a wholesale approach.
In the United Kingdom, which has a wholesale regime for fixed network internet access providers, but also has facilities competition from O2 Virgin, market share structure also is not dissimilar from markets where competition is largely wholesale based.
In the U.S,. fixed networks market, which relies on facilities-based competition, we also see the “market leadership by three firms” pattern. The qualification is that no fixed network firm is actually allowed to cover the entire market, which adds a bit more fragmentation, in terms of firms with four percent to five percent market share.
Source: Leichtman Research Group data, IP Carrier analysis
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