Comments on the State of Competition in CMRS Market

A proper analysis of the CMRS markets in the United States will indicate that the wireless market as a whole demonstrates an absence of effective competition, is likely to become less competitive, and produces active and ongoing consumer harms as a result of insufficient competition. The Commission should evaluate competition in its upcoming Fourteenth Report through the Commission’s standard framework of market structure, provider conduct, consumer behavior (or consumer choice), and market performance – but the Commission should also consider a broader range of factors in each aspect of this framework, reflecting long accepted economic literature. Under the Commission’s standard framework, especially when considering the full range of relevant factors, the CMRS markets are demonstrably uncompetitive. Additionally, significant barriers to entry and barriers to growth will likely ensure that CMRS markets remain uncompetitive absent regulatory intervention by the Commission.

A number of specific factors, largely ignored by the Commission in past CMRS reports, demonstrate substantial limits on competition and barriers to entry and growth. At a minimum, the Commission should examine the impact of HHIs at the regional level, using the granular detail collected for the Thirteenth Report to question why some EAs have particularly high levels of concentration. The Commission should examine parallel pricing and parallel conduct from providers, and the signs such behavior presents of competitive problems. The Commission should consider the impact of early termination fees, lengthy contracts, and handset exclusivity arrangements on consumer behavior and choice. The Commission should factor profitability into its examination of market performance. Finally, the Commission should take a close look at substantial barriers to entry and growth in CMRS markets, including limited spectrum resources disproportionately held by a few incumbent carriers, excessive costs for special access services, and loopholes in the existing roaming regulations.

Above all, the Commission should interpret the concept of “effective competition” through the lens of the user at every opportunity, and should examine all obstacles to consumer choice and innovation. The Commission should strive to put the needs and concerns of individuals above those of industry. The stakes of proper market analysis are high and will only get higher; wireless technologies are an increasingly significant platform for economic activity, public participation, and social interaction. The Commission’s misguided diagnosis of the wireless industry’s competitive health, and its failure to pursue pro-competitive regulatory reform, can only undermine or hold back the larger potential of wireless platforms.

Following a detailed examination, the Commission cannot but find that the current CMRS markets and regulatory structures have produced fewer choices for consumers in pricing models, services, applications, and devices. The absence of effective competition has also limited innovation, particularly in the adjacent device market, and has discouraged investment to improve the quality of wireless networks. The Commission must recognize and address the failures of the current CMRS markets by intervening to limit barriers to entry, consumer choice, and innovation.

To read the full comments, download the PDF below.