Top 10 Signs that the Wireless Market is Competitive

By Michael Hanley, the Digital Policy Institute

The Digital Policy Institute believes that advancing the interests of consumers should be a major, driving force in government policymaking processes aimed at broadband expansion and enhanced connectivity, including wireless. Our 21st Century digital infrastructure can be the conduit for many consumer benefits. As part of our review of those many benefits, we’ve developed a “Top-10” list that federal and state officials should consider when making choices that can affect the competitive nature, availability and capacity of wireless broadband.   Consistent with the FCC’s newest report providing evidence that American consumers are being well served by the wireless sector, we’d like to highlight some signs that show us the marketplace is dynamic, highly competitive and consumer-centric.  (FCC)

1. The Existence of “Price Rivalry”: Reports from the FCC and media confirm that providers have been cutting prices in order to effectively compete. The FCC has termed this phenomenon “price rivalry.” A key example of this behavior came in 2009, when Sprint offered unlimited mobile-to-mobile calling to any domestic wireless number. Another example was seen in late March 2013, when T-Mobile USA officially unveiled a key part of its new “Un-carrier” strategy by releasing new pricing for its Value plans (which do not include device subsidies). (FierceWireless).  Actions like these, and those taken by other wireless broadband providers, pressure their competitors into lowering their prices. Former FCC Chief Economist Gerry Faulhaber notes that this result is “the epitome of competition.” (Faulhaber)


2. Declining Prices: Alongside the phenomenon of price rivalry is the reality that both cellular CPI and data prices have been declining consistently throughout the last decade. In fact, wireless service prices have declined every year since 2002, with the exception of 2008, when they remained the same as the previous year. An examination of two key pricing indicators, the Wireless Telephone Services component of the Consumer Price Index and the per-minute price of voice service, shows that mobile wireless prices declined overall in 2010 and 2011. The Wireless Telephone Services CPI declined for two consecutive years, while the per-minute price of voice service remained roughly stable in 2010 and then declined in 2011. To further illustrate this point, as of December 2011, wireless prices were 41 percent less than those of December 1997.  Data prices have undergone a similar change with the cost declining 90 percent since 2008. We have seen real and substantial decreases in service pricing. (Hahn)


3. Consumer-Centric Wireless Deployment:  The migration to 4G LTE is business and consumer-centric.  When compared to prior mobile technologies, 4G LTE improves the speed of data transfer (greater bandwidth), offers faster network response time (lower latency) and increases overall network capacity (improved spectrum efficiency).  In addition to mobile phones, consumers are seeing new consumer electronic devices hit the market (cameras, notebooks, ultra-portables, and gaming devices) that will incorporate LTE modules.  According to a recent report by Arthur D. Little, 4G LTE deployment offers improved customer service, personal and team productivity gains, direct cost reductions and improved flexibility and decision making. (A. D. Little)
4. Increased Investment:  The year 2012 gave further indication that wireless competition is alive and well. During that period, wireless service operators announced several current or future investments.  For example, in November 2012, AT&T announced an additional $14 billion investment over the next three years into its wired and wireless infrastructure as part of the company’s Velocity IP project; in so doing, the company will expand its LTE network to cover 300 million people by the end of 2014. (TechCrunch).  Similarly, Verizon Wireless announced $256 million in wireless network enhancements across New England (Verizon Wireless).  According to the FCC’s March 2013 Mobile Wireless Competition Report, annual incremental investment in wireless networks rose to $25.3 billion in 2011, almost 25 percent over what it was two years before. (FCC)


5. Spectrum Scarcity: The issue of spectrum scarcity is a pertinent one for mobile wireless providers. Combine this concern with the surprising assertion from some public interest advocates that there are too few providers in the wireless market, and you are left with a unique situation.  Economists at the Phoenix Center for Advanced Legal and Economic Public Policy Studies assert that the scarcity of spectrum may actually help maintain the competitive ethos needed in the industry.  “The addition of a spectrum constraint to the traditional model of competition turns the conventional view that high industry concentration is a bellwether of poor economic performance on its head.  Indeed, under a binding spectrum constraint, a market characterized by few firms (rather than a large number of firms) is more likely to produce lower prices and possibly increase sector investment and employment.” Spectrum scarcity, then, supports the argument that competition does, in fact, exist in the wireless market. If it did not, chances are the telecom economy would be far worse off. (Phoenix Center)


6. Choice of Providers:  The FCC’s March 2013 Mobile Wireless Competition Report to Congress, using data from the Bank of America Merrill Lynch’s Global Wireless Matrix, notes that globally “the United States had the least concentrated mobile market at the end of 2011…” if Orange UK and T-Mobile UK are listed as a single provider. In short, the raw data throughout these reports clearly demonstrates “a vibrant and competitive market where consumers enjoy a tremendous array of options.” (FCC)

7. Choice of Devices. One metric to assess the deployment of wireless is to consider the number of handsets sold in the United States. A report by Strategy Analytics shows an estimated 167 million smartphones were shipped in 2012, indicating that the United States currently leads in this sector. Additionally, the U.S. market was found to lead the world in mobile broadband subscribers.  (Faulhaber)  Furthermore, and according to the FCC’s March 2013, Mobile Wireless Competition Report, between 2009, and 2011, the number of wireless connected devices grew by 26.6 million. (FCC)

8. Growth of Mobile Traffic: U.S. mobile traffic increased 139% in 2012, growing to become 18% of total Web traffic. By 2014, it is estimated that 50% of Web traffic will come from mobile devices.  The fastest growing industries:  B2C services; Web publishing; healthcare and social services; arts and entertainment; and higher education.  (Bluetrain Mobile)


9. Increased Advertising   Mobile advertising spending has grown tremendously in the past five years, and growth is expected to accelerate in the future.  eMarketer expects overall spending on mobile advertising in the U.S., including display, search and messaging-based ads served to mobile phones and tablets, to rise 180% this year to top $4 billion. eMarketer’s previous forecast, made in September 2012, was for substantially slower growth of 80%, to just $2.61 billion. Now eMarketer expects U.S. mobile ad spending to reach $7.19 billion next year and nearly $21 billion by 2016, a significant upward revision. (eMarketer)


10. Wireless Substitution. In the first six months of 2012, more than one of every three U.S. households (35.8%) did not have a landline telephone but did have at least one wireless telephone. Approximately 34.0% of all adults (about 80 million adults) lived in

households with only wireless telephones; 40.6% of all children (approximately 30 million children) lived in households with only wireless telephones. These figures represent an increase of 15.6 percentage points of wireless-only households since December 2008. This reality is a testament to the utility and affordability of wireless services and products, an outgrowth of a competitive market. (CDC)



Michael Hanley is editor-in-chief of the International Journal of Mobile Marketing (IJMM) and a senior research fellow with the Digital Policy Institute, an independent, interdisciplinary research and policy development organization located at Ball State University in Muncie, IN.  The DPI has served as a catalyst for research and education on digital media issues since 2004.  Additionally, the DPI is a member of the Consumer Advisory Committee at the Federal Communications Commission (FCC).    @Digital_Policy