GAO Report Finds Positives, Negatives In Wireless Market
A new report on the U.S. wireless market from the Government Accountability Office found that while consumers have benefitted in the last decade from lower prices and better coverage, industry consolidation has posed challenges for the competitiveness of smaller carriers.
The GAO examined the state of the industry since 1990 and found that wireless use has grown from 3.5 million mobile phone subscribers in 1989 to about 285 million by the end of 2009, while nearly 40 percent of U.S. households primarily use their wireless phone instead of a landline phone.
However, the wireless market has consolidated in recent years with only four companies, AT&T, Sprint Nextel, T-Mobile USA, and Verizon Wireless, serving 90 percent of the wireless phone subscribers, according to the report. Despite this, the cost of wireless service has declined in the last decade. The average price for wireless service in 2009 was approximately 50 percent of what it was in 1999
"Industry consolidation has made it more difficult for small and regional carriers to be competitive," the report said. "Difficulties for these carriers include securing subscribers, making network investments, and offering the latest wireless phones necessary to compete in this dynamic industry."
The GAO said that smaller providers and others not linked to the four major wireless operators argue that some FCC policies favor the big wireless operators, such as the size of the wireless spectrum blocks offered in some of the recent FCC spectrum auctions, and policies governing special access to the infrastructure that connects cell phone towers to wireline phone networks. Much of that infrastructure is owned by big providers such as AT&T and Verizon, which critics say they offer access to at inflated prices.
"Better data on special access rates, in particular, would clarify the extent to which these policies hinder competition," the report said. The GAO also recommended that the FCC consider expanding other data it collects on the wireless industry such as information on prices, capital expenditures and equipment costs in order to get a better view of the competitive conditions in the wireless market.
Rick Kaplan, chief counsel to FCC Chairman Julius Genachowski, agreed with the GAO about the need for improved data and said the FCC is working to address the issue. "The FCC has taken proactive steps to improve our data and analysis, including collecting new and better data for this year's Mobile Wireless Competition Report," Kaplan said in a statement.
The NoChokePoints Coalition praised the report for noting "that special access is an 'essential element' to the provision of wireless services, including wireless broadband service, and that special access places a chokehold on wireless competition and deployment, particularly in rural areas," the group's spokeswoman Maura Corbett said in a statement. The group is made up of telecom providers such as Covad Communications, Sprint Nextel and T-Mobile, public interest groups such as Public Knowledge and the U.S. Public Interest Research Group, and others.
Sprint Nextel Senior Vice President Vonya B. McCann urged the FCC to act on a pending proceeding on this issue, saying in a statement, "Further delay only maintains inflated rates that harm both the wireless industry and virtually every sector of the economy which depends on high speed broadband connections."
House Energy and Commerce Chairman Henry Waxman, D-Calif., said the report highlights the need to better examine concerns about the special access market. "It is time for the FCC to complete its evaluation of special access pricing," he said in a statement. "Pro-competitive policies in the special access market are essential to maximize choice, affordability, and technological innovation in the wireless market."
The report noted that better data also is needed on whether certain industry practices such as early termination fees for subscribers who break their wireless contracts early hinder competition by deterring consumers from switching providers. Sens. Amy Klobuchar, D-Minn., who has introduced legislation that would place limits on early termination fees, and Ron Wyden, D-Ore., said the report highlights concern about the impact early termination fees have on competition.
"The FCC needs to police anti-competitive practices including excessive early termination fees, restrictive contracts, and network practices that restrict innovation, commerce and job creation," Wyden said in a statement.
Updated: Steve Largent, president and CEO of the wireless industry group CTIA, focused on the report's provisions noting the growth in wireless use, improvements in coverage and decreases in prices.
"In finding that wireless consumers are seeing 'lower prices and better coverage,' today's GAO report confirms what we've been saying for a long time - that the U.S. wireless industry is extremely competitive and continues to respond to increasing consumer demand by delivering real benefits for American consumers," Largent said in a news release.
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