The FCC has released the 20th Mobile Wireless Competition Report coming to the conclusion the wireless market in the US has an effective amount of competition, and guess what, the Democrats disagree.
The report itself looks to address a simple question; is the mobile market in the US offering a suitable level of competition to ensure a fair deal for the consumer. It might sound easy, but the Democratic Commissioners have been picking holes in the depth of the report, as well as the definition of competition. This is the first time in a while the report has actually assessed whether the market is competitive, as the FCC strayed from making such a conclusion during the Obama presidency.
There isn’t a perhaps here, we shouldn’t be surprised at all at the disagreement. Most people around the world feel their own politicians are childish and immature, but it always seems to be taken up a level in the US. If the Republicans praised the Apollo moon landings, the Democrats would say they were fake news. If Democrats said the sky was blue, Republicans would accuse them of being colour blind. Its juvenile but it isn’t new.
And while this bickering is as old as time, could a renewed sense of enthusiasm for competition in the US give the green light for a merger between two of the largest players in the market… The report can only assess what is happening now, but it does seem to be laying the foundations for some M&A action over the next couple of months.
Acquisition talks between T-Mobile and Sprint have emerged once again, and perhaps it won’t be that long before the number three and four players in the space combine. If this report is to be taken as gospel, there is effective competition between the national players, plus a number of regional providers, allowing for a fair deal for the consumer. Such market conditions make an acquisition a simpler road to travel.
This is quite a different story from 2011, when AT&T tried to acquire T-Mobile. The FCC opposed the acquisition on the grounds that it would harm competition. This report is far from a green light for a T-Mobile/Sprint combination, but establishing there is a healthy market for the consumer now is one of the steps which will be needed for a successful marriage. It is a positive sign for those who are pro-deal.
“The 20th Report reviews many factors indicating that the wireless marketplace is, indeed, effectively competitive,” said FCC Chairman Ajit Pai.
“But looking at the bigger picture, most reasonable people see a fiercely competitive marketplace. For example, since the FCC’s last report in 2016, all four national carriers have rolled out new or improved unlimited plans. This is strong, incontrovertible evidence.”
Pai is essentially looking at the basic figures, which he believes are widely accepted as indicators of success or failure. For example, consumer demand and output, average prices, and network performance, coverage, and capacity of each of the providers. It is quite a narrow view on the mobile ecosystem, but all of the figures are heading in the right direction. This shouldn’t really be seen as a surprise either.
The total number of subscribers increased by 5% year-on-year, data volumes were up 42% to 13.7 trillion Mb in 2016 and monthly data usage per smartphone subscriber rose 39%. In terms of average price, ARPU per subscriber unit fell during 2016 from $44.65 to $41.50, while the cost per Mb also fellto less than half a cent per Mb in 2016. All good so far.
In terms of the networks, at least four service providers covered approximately 92% of the US population with 3G compared to 82% at the beginning of 2014. LTE coverage is claimed to be at 89% of the population, while at least four service providers covered 55% of the population in rural areas, an increase from 41% in July 2015. Whether this is good enough we’ll leave up to you.
From a quality perspective, mean LTE download speed increased from 14.4 Mbps for the first half of 2014 to 23.5 Mbps for the first half of 2017, an increase of over 60%. Median speed increased from 11 Mbps to 15.5 Mbps.
That said, the report does not cover other areas of the ecosystem such as towers, backhaul, and transport facilities, or factors such as mobile applications and content. Another glaring omission is the availability of data roaming agreements. The Democrats are right here. These are all areas which should contribute to the assessment. And it isn’t the only issue found.
“As part of this assessment, the agency is tasked with an analysis of whether or not there is ‘effective competition’. Simple enough,” said Democrat Commissioner Jessica Rosenworcel. “But to make this determination in the affirmative – as this report does – requires that the Commission define ‘effective competition’. On this account it fails.
“Instead of a definition of this essential threshold, we have all manner of apologies and admissions. We are told there is no single definition used by economists or policy authorities. We are told that upstream and downstream market segments involving network equipment, operating systems, and applications are outside the scope, and yet the core of what is ‘effective competition’ remains undefined.”
It’s a simple point to make. If you are going to say an industry is competitive, you have to know what competitive actually means.