May 20, 2010
If you've sometimes thought there's not a lot of difference in the deals you get from Verizon Wireless, Sprint, or AT&T, you're not alone. The Federal Communications Commission is openly questioning the amount of competition in the wireless industry.

In its annual report on the state of competition in the mobile wireless industry, the FCC finds there appears to be increasing concentration in the mobile wireless market. One widely-used measure of industry concentration indicates that concentration has increased 32 percent since 2003 and 6.5 percent in 2008.

"Specifically, the report confirms something I have been warning about for years -- that competition has been dramatically eroded and is seriously endangered by continuing consolidation and concentration in our wireless markets," said Michael Copps, one of the three Democrats on the Commission. "We are going to need an extra dose of vigilance going forward and use whatever policy levers we have available to ensure good outcomes for American consumers," he said.

The report found that providers continue to invest significant capital in networks, despite the recent economic downturn. One source reports capital investment at around $25 billion in both 2005 and 2008, while another shows that capital investment declined from around $25 billion to around $20 billion during the same period.

Because industry revenue has continued to grow, both sources show that capital investment has declined as a percentage of industry revenue over the same period, from 20 percent to 14 percent.

The report also tracks the changes in how consumers are using wireless services. At the end of 2008, some 90 percent of the U.S. population had some type of mobile wireless device.

More smartphones

Handset manufacturers have introduced a growing number of new smartphones -- 67 in 2008 and 2009 -- that provide mobile Internet access and other data services, and provide many of the functionalities of personal computers.

The report also shows that data traffic has grown significantly, with the increased adoption of smartphones and data consumption per device. Especially as mobile wireless broadband usage grows, access to spectrum becomes increasingly important for competition.

While many wireless service providers have access to significant amounts of mobile spectrum, most of the spectrum below 1 GHz, in both the cellular band and the 700 MHz band, is not widely held.

In mid 2009 the U.S. Government began an investigation of competition in the wireless industry. The FCC is currently considering ways to provide more spectrum to wireless companies to meet a growing demand for smartphones and other mobile devices.