FCC to Probe Competition in the Wireless Market
Aug. 27, 2009
(Bloomberg) -- U.S. regulators voted to examine whether there is adequate competition in the wireless marketplace, where AT&T Inc. and Verizon Wireless are the largest participants. The Federal Communications Commission voted 5-to-0 today to pursue the inquiry. The agency already is looking to see if consumers are harmed by exclusive contracts between wireless providers and handset makers, such as the deal AT&T struck for Apple Inc.'s iPhone.
Topics before the agency include whether large companies like AT&T and Verizon Wireless thwart competition by charging high fees for connecting smaller rivals’ calls over their networks, and for use of lines that carry data for wireless Internet services. The probe is among indications that the Obama administration is stepping up scrutiny of antitrust matters. “This FCC will have a relentless focus on innovation and investment, on competition and consumers,” said FCC Chairman Julius Genachowski. The Democrat was presiding over his second monthly meeting since taking office in June as President Barack Obama's choice to run the agency that regulates television, radio and telephones. The inquiry approved today looks “broadly at all of the elements that affect what we understand to be the mobile marketplace,” Genachowski said. The FCC didn’t immediately issue a text of its inquiry.
Earlier today the FCC voted to look into ways it could spur innovation in the wireless market, such as by making more efficient use of radio spectrum. The agency also voted to look into requiring companies to provide more information to help consumers as they choose providers and plans.
‘Asking the Right Question’
Other issues before the agency include the length of contracts tying subscribers to carriers, and fees charged customers when they want to leave a contract early. The FCC probe may help smaller wireless companies, Steve Clement, an analyst at Pacific Crest Securities in Portland, Oregon, said in an interview. Those companies have asked the FCC to help them gain connections for subscribers who leave home markets and travel to areas covered by large carriers’ signals. The FCC “is asking the right questions to maximize innovation,” Christopher Libertelli, senior director of government and regulatory affairs for EBay Inc.'s Skype unit, said in an e-mailed statement. The FCC is separately reviewing Skype’s complaint that wireless carriers block consumers from using its Internet-based calling services.
Market Concentration
Wireless companies “appreciate the opportunity to respond” to the FCC, said Steve Largent, president of CTIA-The Wireless Association, in a statement. The Washington-based trade group represents AT&T, Verizon Wireless and more than 270 other companies. “We have the least-concentrated wireless market on the planet,” Largent said, according to his statement, which was e- mailed. “Innovation is everywhere.” AT&T and Verizon Wireless are likely to tell the agency that the “wireless industry is certainly very healthy,” Chris King, a Baltimore-based analyst with Stifel Nicolaus & Co., said in an interview. “Pricing has come down materially.” Robert McDowell, the senior member of the panel’s Republican minority, supported the probe and said the wireless market “appears to be robustly competitive,” with many consumers having a choice of five carriers. “The phenomenal success of the wireless industry shows how well a light regulatory touch works,” McDowell said. The FCC previously began looking into exclusive handset deals, whether wireless carriers unfairly block Internet calling that could undermine their voice-subscription fees and why an application from Google Inc. was kept off the iPhone.
Congressional Ferment
The queries follow ferment in Congress over wireless charges and exclusive handset deals. Senators including Herb Kohl, the Wisconsin Democrat who heads the antitrust panel, have asked the agency to investigate the wireless industry. The agency on June 18 announced its probe of whether consumers are shortchanged by carriers’ exclusive contracts for wireless handsets. The deals link the iPhone to AT&T, Palm Inc.'s Pre to Sprint Nextel Corp. and Research In Motion Ltd.’s BlackBerry Storm to Verizon. Apple on Aug. 21 told the agency that it was concerned Google Voice co-opts the iPhone’s software. Google Voice lets customers use one phone number, receive calls on multiple devices and access voice mails. The FCC’s regulatory reach in the wireless industry includes approval of mergers and administering rules that aim to bolster competition, such as letting customers keep phone numbers when they switch carriers.
Market Share
The four largest U.S. wireless carriers are Dallas-based AT&T; Deutsche Telekom AG's T-Mobile unit; Overland Park, Kansas-based Sprint Nextel; and Basking Ridge, New Jersey-based Verizon Wireless, owned by Verizon Communication inc. and Vodafone Group PLC. The four carriers serve about 90 percent of U.S. wireless subscribers, and AT&T and Verizon account for about 60 percent, according to Joel Kelsey, Washington-based policy analyst for Consumers Union, the non-profit publisher of Consumer Reports magazine. Verizon Wireless reported having 87.7 million customers in a July 30 filing, and AT&T said in an Aug. 5 filing that it had 79.6 million wireless subscribers.
‘Long Overdue’
“This investigation is long overdue,” Andrew Jay Schwartzman, a Washington communications attorney who has followed the FCC for more than 30 years, said in an e-mailed comment today. “The country’s four major wireless providers have enjoyed the fruits of market power for too many years, at the expense of the public’s ability to gain widespread access to low-cost mobile broadband services,” said Schwartzman, who is president of Media Access Project, a nonprofit law firm.
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