Sunday, June 26, 2011

FCC Releases 15th Annual Wireless Competition Report

The total service revenue generated by the mobile wireless industry reached approximately $154.7 billion in 2009, according to the FCC's newly released Annual Report and Analysis of Competitive Market Conditions With Respect to Mobile Wireless.

The report provides a look at competition across the entire mobile wireless ecosystem, including an analysis of the "upstream" and "downstream" market segments, such as spectrum, infrastructure, devices, and applications. It makes no formal finding as to whether there is, or is not, effective competition in the industry. Data is presented through the end of 2009.

Some key findings:

  • At the end of 2009, there were 274.3 million subscribers to mobile telephone, or voice, service, up nearly five percent from 261.3 million at the end of 2008.

  • At the end of 2009, there were 55.8 million subscribers to mobile Internet access services at speeds exceeding 200 kbps in at least one direction – which is more than double the number at the end of 2008.

  • Two measures of pricing for wireless services – the Cellular Consumer Price Index (CPI) and unit price (revenue per user per month divided by average unit consumption per month) – show that the price level remained generally flat during 2009. After declining every year since 1997, the annual Cellular CPI was unchanged during 2009, while the overall CPI decreased by 0.4 percent. In addition, average voice revenue per minute (RPM), rounded to the nearest cent, remained at $0.05 for the third straight year.

  • The Herfindahl-Hirschman Index (HHI), which is calculated by summing the squared market shares of all
    firms in any given market, is a commonly used measure of industry concentration. In the mobile wireless services industry, the weighted average of HHIs (weighted by population across the 172 Economic Areas in the United States) was 2811 at the end of 2009, compared to 2842 at the end of 2008.

  • Most of the spectrum below 1 GHz suitable for the provision of mobile broadband is held by the two largest mobile wireless service providers. Verizon Wireless and AT&T together hold approximately 90 percent of Cellular spectrum based on megahertz-POPs (MHz-POPs),18 which was the first band to be licensed for commercial mobile services and has the most extensive network buildout. Verizon Wireless holds 45 percent of the MHz-POPs of Cellular and 700 MHz spectrum combined, while AT&T holds approximately 33 percent. In the Broadband PCS (PCS) and Advanced Wireless Services (AWS) spectrum between 1 GHz and 2.5 GHz, no licensee holds more than 23 percent of the MHz-POPs, with TMobile holding the most. In the 2.5 GHz band (which include the Broadband Radio Service (BRS) and Educational Broadband Service (EBS)), Clearwire holds the majority of the spectrum.

In his remarks on the report, FCC Commissioner Michael J. Copps noted darkening clouds over the state
of mobile competition. In his words, "It also appears that consumers are no longer enjoying falling prices, according to the CPI for cellular services. We know there is a looming spectrum crunch and a growing need for backhaul. There is no doubt that the mobile market is an American success story, and there are many ways to measure industry health. But it would be foolish and decidedly not in the public interest to ignore the facts
this Report reveals. If we want Americans to continue to enjoy innovation, affordability and improved mobile coverage, we must heed these facts and continue to examine areas where the Commission can act to encourage mobile competition."

The full 300 page report is online.