Anti-competition Groups’ Assertion Wireless Industry Not Competitive Ignores Facts & Common Sense

June 16, 2009

In some of the worst sophistry I have seen in a long time, several pro-regulation groups, who obviously oppose competition policy for communications, petitioned the FCC with a classic straw man argument that essentially asserts that because wireless competition is imperfect, its “demonstrably uncompetitive” “and “produces active and ongoing consumer harms.”

  • Any open, transparent, balanced and fair-minded review of the real competitive facts in the U.S. wireless industry will expose these assertions as un-true and un-supported by the balance of available evidence.
  • The sophistic comments, which can be found at the bottom of this Media Access Project press release are an obvious “stalking horse” for those who advocate abandoning private enterprise competition policy in favor of common carrier regulated public infrastructure policy.

The comments consistently present fallacious “black or white” arguments that if a competitive imperfection can be asserted, however thin, unsupported, irrelevant or out-of-context, one must conclude that the market is anti-competitive requiring ongoing government regulation of prices, terms, conditions, operations and network management.

  • If this is the best they can do to try and misrepresent the state of wireless competition to justify common carrier regulation of wireless, it is ironically a powerful argument for the actual competitiveness of the U.S. wireless market.

Let me debunk their straw man arguments using the best industry data available filed with the FCC.

First, they falsely assert that the market “structure shows the market is not competitive.”

  • The group only asserts that the HHI market concentration index is high without sharing the highly relevant fact that the U.S. has the lowest HHI index in the OECD!
  • They also ignore the fact that the largest U.S. wireless carrier has less market share than all but one OECD market leader, and that the lead U.S. carrier has 50% less market share than the top wireless provider in Japan, Korea, France, or the Netherlands, all countries the groups filing comments tout as broadband leaders to emulate.
  • They also fail to note that the U.S. is leading the world in getting DTV 700 MHz spectrum into the wireless marketplace soonest.
  • They also fail to note that the U.S. leads the world in deploying an additional WiMax based national network, Clearwire, and is ahead in transitioning toward LTE 4G technology.
  • They also ignored the April 2008 assessment of former Vice President Al Gore that the U.S. has the “most competitive wireless industry in the world.”

Second, they falsely assert that market “conduct shows the market is not competitive.”

  • Anyone with eyes and ears experiences the barrage of wireless advertising for customers. If the industry were not competitive why would the industry spend more on marketing and advertising than any other industry in the U.S.?
    • They market so much because customers can and do switch — so U.S. wireless carriers bend over backwards to keep them with lower prices, more value, new devices, new features, new innovations, etc.
  • The commenters also ignore essential competitive facts about the U.S. market:
    • American consumers pay among the lowest wireless prices in the OECD and ~60% less than the average OECD country. How is that anti-competitive?!
    • American consumers also use 2-6 times more minutes of use than any other OECD country. How is a market with that core attribute “demonstrably anti-competitive?”
Third, they falsely assert that “Behavior shows the market is not competitive.”

Once again the commenters omit exceptionally important competitive facts. In classic straw man technique, they only say what can’t be done, without putting it into context about what can be done.

  • According to the CTIA, consumers have the choice of 630 different handsets from 33 companies and 29 of those handsets are WiFi enabled — i.e. providing free wireless access.
  • They only complain about the lack of perfection and ignore the fact that American consumers have the choice of over 40,000 different applications, with 20,000 more in the pipeline for this year alone!

It is inherently misleading for the commenters to talk about what a consumer cannot do, outside of the context of what they can do. There are a wide variety of legitimate economic and pro-competitive reasons why competitive choice is not perfect.

  • Markets certainly are never perfect, and that is equally true for regulation.

Fourth, the commenters falsely assert that “performance shows the market is not competitive.”

  • The performance that the U.S. has the lowest prices, most usage, most choice, most investment, most progress towards 4G networks shows that the U.S. wireless market is the most competitive world — not that it is anti-competitive!

Lastly, the commenters falsely assert that “barriers to entry and growth further limit competition.”

  • The complaint here is that wireless competition is a capital intensive, high fixed cost business, which is true, but what the commenters fail to consider is that high fixed-cost businesses like wireless naturally create intense competition to please and retain existing customers — via a wide array of benefits and goodies that all greatly benefit the consumer.

In short, this set of comments is very thin gruel.

  • The commenters obviously must not think the FCC expects much analytical rigor or logic, because the commenter assertions don’t prove their argument, they only expose that the commenters don’t believe in competition as a policy at all.

 

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