Thursday, September 29, 2005

FCC Sees Healthy Competition in U.S. Mobile Market

The FCC adopted its Tenth Annual Report to Congress on the state of competition in the mobile telephone business, concluding that there continues to be effective competition based on several factors: the number of competing carriers providing service in an area, the extent of service deployment, prices, technological and product innovations, subscriber growth, usage patterns, churn, and investment. Although consolidation during the period covered by the report has reduced the number of nationwide mobile telephone carriers, the FCC found that none of the remaining carriers has a dominant share of the market and that the market continues to behave and perform in a competitive manner.

Consumer behavior metrics provide further evidence that mobile telephone carriers have an incentive to compete on price and quality of service. For example, churn rates, or the percentage of customers who switch providers each month, averaged 1.5 to 3.0 percent per month during 2004, a slight decline from the previous year. The implementation of local number portability (LNP) beginning in November 2003 has lowered consumer switching costs by enabling wireless subscribers to keep their phone numbers when changing wireless providers. While the advent of LNP has not resulted in an increase in churn, evidence continues to suggest that LNP has put added pressure on carriers to improve service quality in order to retain existing customers and to avoid increased churn.

Some other highlights from the report:

  • During 2004, the number of mobile telephone subscribers in the United States rose from 160.6 million to 184.7 million, increasing the nationwide penetration rate to approximately 62 percent at the end of 2004.

  • The amount of time mobile subscribers spend talking on their mobile phones has also increased, with the average minutes of use per subscriber per month rising to more than 580 in the second half of 2004, up from 507 in 2003 and 427 in 2002.

  • Two indicators of mobile pricing -- revenue per minute (RPM) and the cellular Consumer Price Index (Cellular CPI) -- showed a continued decline in the price of mobile telephone service during 2004. The RPM, which can be used to measure the per-minute price of mobile telephone service, fell 12 percent during 2004, and the Cellular CPI declined 1.0 percent during 2004 while the overall CPI increased 2.7 percent.

  • The volume of text messaging traffic grew to 4.7 billion messages per month in December 2004, more than double the 2 billion messages per month reported in December 2003.

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