It has been a big week for mobile phone regulation, or at least discussion about it. On Monday a quartet of United States Senators sent the Federal Communications Commission a letter asking the agency to probe whether exclusivity deals between wireless handset makers and mobile services limit consumer choice. On Tuesday AT&T and Verizon defended the cost of text messaging, insisting that most consumers opt for affordable bulk texting plans.

And on Wednesday the Senate Commerce Committee held a hearing on the "consumer wireless experience," at which reform advocates continued to press for the unbundling of wireless services and handsets—basically letting consumers pick and choose wireless applications, as they do on wired networks, thanks to the FCC's Carterfone principle.

But behind the scenes, reform groups and the carriers are debating a broader problem: is the wireless industry competitive? Asking the question isn't just a good idea, it's the law. When Congress created the statutory category of Commercial Mobile Services in 1993, it told the FCC to submit an annual report on the quality of wireless service. The agency is now working on number fourteen. The latest report announced that there is "effective competition" in the market. The country had 263 million subscribers as of December 2007, it says—a penetration rate of about 86 percent.

"Mobile telephone service in the United States remains relatively inexpensive on a per minute basis compared with that in Western Europe and Japan," the survey concluded.

Decline to impose

This sort of talk is good news for carriers, because it allows them to argue that the competitive nature of wireless overall makes the services of an individual provider less of a issue. Consumers have choices, negating the need for regulation.

"To foster continued growth and innovation the wireless industry is asking the Commission to dismiss the pending Skype Petition seeking imposition of Carterfone-type regulations on CMRS providers;" argued CTIA - The Wireless Association in its latest comment on the survey, "to decline to impose net neutrality regulations with respect to content, application, or device access obligations on wireless broadband providers or to adopt a new non-discrimination principle."

That plea probably isn't going to receive as sympathetic an ear from Julius Genachowski's FCC as it did from Kevin Martin's. Example: interim FCC Chair Michael Copps' disclosure on Thursday that he wants the FCC to open up a proceeding on handset exclusivity.

And that's why mobile groups and reformers are rushing their comments to the agency in time for incorporation into the FCC's 14th survey. Two of those filings are a study in contrast—one coming from a sextet of advocacy groups, the other coming from CTIA. The Consumers Union, Free Press, Public Knowledge and three other non-profits argue that the FCC's 13th annual report skipped a lot of stuff when calculating competitiveness.

A "shallow analysis," they call the 13th survey. Here's some of what they say the FCC missed.

You didn't separate mobile voice from broadband

The reform filing argues that the FCC created a "distorted" picture of the level of competitiveness in wireless because it lumped voice and broadband services together. Sure, CU et al concede, they're often bundled to consumers. But mobile broadband is "disproportionately available to large incumbent carriers," e.g., AT&T and Verizon. They're the ones, after all, that don't have to negotiate for the special access services you need for backhaul. When you focus on the carriers who offer wireless broadband, it's a much less competitive market.

"A deeper evaluation of these services will indicate a higher degree of concentration and more obstacles to competition among providers of mobile data and mobile Internet access services as compared to mobile voice services," the filing warns.

Zero for conduct

The CU commentary also suggests that if you take a closer peek at carrier behavior rather than the number of carriers in a given market, you find similar pricing structures that suggest little actual competition. Forget minute-to-minute, most consumers pay over five hundred dollars a year for wireless access on average, "much more than users in most other developed nations." Most voice plans range around 29 to 39 a month. "Pay-as-you-go options remain costly for customers looking for economical solutions," the writers note.

The carriers haven't adequately explained their data plan pricing structures either, the services appearing to be "far removed from any possible cost." Why does AT&T effectively charge $480 for every gigabyte of data consumed above its 5GB a month plan, the groups ask—this famously delivering a $5,000 bill to an Oklahoma consumer.

And sure, bulk texting plans give consumers more options, but why do carriers still charge 20 cents an individual message (a reality that makes me reluctant to text friends who I know don't use the service very often)?

"Any revenue received by the provider on incremental text message usage is nearly pure profit," the commentary argues. "To put these profits in perspective: considering how little data is transferred in an SMS message, at 20 cents per message, consumers pay the equivalent of almost $1,500 per megabyte of data transferred, a rate over seventeen times more expensive than receiving data from the Hubble Space Telescope."

Glaring signs ignored

Then there's the oft-cited problem of device limits, among them Skype VoIP and SlingPlayer mobile not being allowed on AT&T's 3G network. "In the Fourteenth Report, the Commission should consider limitations on usage as provider conduct indicating a lack of effective competition," the groups write.

The filing cites many other practices that it sees as evidence of a lack of competitiveness: early termination fees, mandatory contract extensions that sometimes come with a new data plan, handset exclusivity arrangements between manufacturers and providers, and restrictions on roaming access for new market entrants.

"Past CMRS reports issued by the Commission have ignored many glaring signs of limits on effective competition, as well as numerous factors indicating that the wireless market will not dig itself out without regulatory intervention," CU and company charge.

On the other hand

But CTIA offers a very different perspective on the problem. All segments of the industry are "aggressively competitive," the trade group argues. "No one carrier holds a dominant share of the wireless market"—the biggest of the top four, AT&T, reaching 28.5 percent of subscribers. And these carriers are aggressively moving out new broadband services, as evinced by a dramatic growth in cell phone sites over the past eight years, almost double the number in 2001.

This has dramatic implications for the FCC's stated goal of getting beyond the broadband duopoly (telco, cable), and establishing a "third pipe" for consumers. "Although some have bemoaned the lack of a third pipe to the home, this concept has been overtaken by events," CTIA argues. "It ignores that many American communities have three, four, five, or more additional choices in the form of mobile wireless broadband competitors providing connectivity to the person."

Unlimited flat rate plans and pay-as-you-go schedules have become widespread, CTIA continues. Carriers are pro-rating early termination fees. And number porting rules allow consumers to switch services easily.

It's not like CTIA wants the FCC to take a completely deregulatory approach to mobile regulation. The trade group wants access to more spectrum and "reasonable time periods" for tower applications. But beyond that, hands-off is the word.

While "certain groups" want the FCC to "consider price or network regulation of the wireless industry," CTIA says, "hopefully the Commission will look at the consumer performance of those industries that are regulated by agencies versus those—like the wireless industry—that are driven by their customers and competition."

Will the mobile industry get the same kind of thinking in the 14th CMRS survey that it praised in the last? It seems likely that the next FCC will heed at least some of the criticisms that consumer groups have offered on earlier reports. Then Congress and the agency itself will have to decide what actions to take, based on the Commission's latest assessment. The deadline for final comments on the annual survey is June 29.

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