Mission Accomplished: Ajit Pai's FCC Declares Wireless Competition Issues Fixed

from the ignore-a-problem-and-it-goes-away,-right? dept

The FCC is required by law to offer an annual report on the state of competition in the broadband industry. Depending on who's in power, and how eager they are to downplay the lack of said competition to the benefit of industry, these reports often provide comical insight into how the regulator fiddles with data to justify policy apathy. Under George W. Bush's presidency, the FCC declared the wireless industry perfectly competitive. Under the Obama administration, the FCC refused to state one way or the other whether the sector is competitive. Neither party has what you'd call courage when it comes to calling a spade a spade.

Fast forward to this year, and you likely won't be surprised to learn that the Ajit Pai led agency has declared the wireless sector perfectly competitive -- for the first time since 2009. In a press statement, Pai declared (pdf) that the re-introduction of unlimited data plans, prompted in turn by a resurgent T-Mobile, is proof positive that the sector is perfectly healthy and "fiercely competitive":

"The 20th Report reviews many factors indicating that the wireless marketplace is, indeed, effectively competitive. I won’t repeat them here; that’s why we have the report. But looking at the bigger picture, most reasonable people see a fiercely competitive marketplace. For example, since the FCC’s last report in 2016, all four national carriers have rolled out new or improved unlimited plans. This is strong, incontrovertible evidence.

And looking at the wireless industry from a superficial level, many would likely agree. But look under the hood and things aren't quite as rosy as Pai would lead you to believe. For one, even with T-Mobile disrupting AT&T and Verizon, these companies still largely engage in theatrical non-price competition, resulting in Americans paying more money for slower speeds than most developed nations. There's also the fact that AT&T and Verizon have a duopoly stranglehold over the special access and tower backhaul market, allowing them to drive up operational costs for competitors like T-Mobile and Sprint.

Pai also just floats right over the other major elephant in the room: the looming merger between Sprint and T-Mobile, which is expected to be formally unveiled in a few weeks. Every analyst in telecom worth their salt expects Pai to rubber stamp the deal, despite the obvious, major competitive impact of reducing the number of major carriers in the space from four to three. Pai's fellow Commissioner Jessica Rosenworcel, who voted down the cocksure declaration of industry health, was quick to highlight this problem in her own statement (pdf) on the decision:

"Like everyone else, I read reports of mergers waiting in the wings. So while this report celebrates the presence of four nationwide wireless providers, let’s be mindful that a transaction may soon be announced that seeks to combine two of these four. While the Commission should not prejudge what is not yet before us, I think this agency sticks its collective head in the sand by issuing this report and implying move along, there is nothing to see here."

Oddly, news outlets like Reuters were quick to somehow insist that declaring the industry perfectly competitive (when under the surface it still really isn't) will somehow "help Sprint and T-Mobile to merge":

"A divided Federal Communications Commission on Tuesday approved a report that found for the first time since 2009 there is “effective competition” in the wireless market, a finding that could help Sprint Corp and T-Mobile US Inc to merge."

But on what planet does a partisan, arbitrary declaration of industry health make it OK to dramatically reduce sector competition further? That's the kind of flimsy logic and mindless megamerger cheer leading you're going to see a lot of the next few months as the industry -- and the policy folk and politicians paid to love them -- tries to convince the public that reducing wireless competition even further in the States is a really wonderful idea.

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Filed Under: ajit pai, competition, fcc, mergers, wireless

Companies: at&t, sprint, t-mobile, verizon