The FCC’s Phony Wireless Crisis

May 20, 2010

By Kelly Cobb
Americans for Tax Reform

The Federal Communications Commission is incredibly adept at creating crises in order to implement their unwarranted regulatory goals. Their ruthless campaign to enact Net Neutrality persists despite hardly any justification or evidence. And today, they’ve announced an entirely new crisis.

For the first time in at least seven years, the FCC’s Mobile Wireless Competition Report has determined the wireless industry isn’t “effectively competitive.” Not only does this conclusion go against nearly every measure of competition (including the FCC’s own data), but it is almost obvious that it was made solely to provide cover for onerous regulations. Chairman Genachowski indicated in his statement that the report helps justify their initiative to mandate that cell users get texts when they’re going over minutes or roaming.Commissioner Copps called it “worrying” and proclaimed: “We are going to need an extra dose of vigilance going forward and use whatever policy levers we have available.”  (Last week Copps’s top staffer said her boss “would love to have jurisdiction over everything.”)  The pro-regulation organization Free Press declared, “The wireless market has substantial obstacles to effective competition, and these obstacles restrict consumer choice, service quality, service price, innovation and investment.”

A look at the FCC’s own facts say otherwise. Today, 74 percent of the U.S. population has a choice between at least 5 wireless carriers, up 9 points from 65 percent last year. 98 percent of the country has access to 3G speeds, up from 63 percent in 2006, and nearly every major wireless carrier is battling to be the first to roll out super fast 4G networks by the end of this year. And that’s less competitive? The FCC also admitted in their report that the cost for cell phone service dropped by 36 percent between 1997 and 2007 at the same time the overall consumer price index rose by 34 percent. But apparently it wasn’t robust competition that brought those prices down.

Further, despite the FCC’s gushing admiration for European style policies, compared to virtually every other country, the U.S. outperforms in wireless competition. According to a leading report from Bank of America/Merrill Lynch in April, cell phone users now pay an average of 4-cents per minute, down from theFCC’s estimate of 10-cents per minute in 2003. This is the lowest price out of of all 26 developed countries studied. And while most Americans can choose from at least 5 providers, Europeans generally max out at 4. The private sector also invested $20.4 billion into wireless networks last year, while Britain, Germany, France, Spain, and Italy invested $17.9 billion – combined.  The report also points to the “Herfindahl-Hirschman Index“, which measures market consolidation, to claim there is not enough competition.  This is odd because the U.S. has the lowest score – meaning the most competition – of all developed countries.

The game in politics is to define yourself, define your opponent, and define the conversation. The FCC’s report on wireless competition appears to be less a neutral study than a political move to, as the report states, “provide data that can form the basis for inquiries into whether policy levers could produce superior outcomes.” Terrific. The FCC has defined the conversation by falsely declaring the wireless market is failing and demonized the largest opponents of new regulations (the companies they will target) in the process, all to set the Commission up as a hero that will save the day with an onslaught of unnecessary new rules and bureaucracy.

Social Heading