May 20, 2010 / 3:45 PM / in 8 years

U.S. fails to describe wireless industry as competitive

WASHINGTON (Reuters) - The U.S. Federal Communications Commission for the first time since 2002 did not describe the wireless industry as having “effective competition,” a situation one senior regulator blamed on consolidation.

The key omission was in an annual report on the state of competition in the wireless industry. The FCC on Thursday released the report, which covers 2008 and a portion of 2009.

The last time the FCC did not describe the industry as having “effective competition” was in a report released in 2002.

The lack of the key phrase could set the stage for U.S. regulators to impose policies and regulations to increase competition for consumers who are demanding more data plans on their mobile handsets to surf the Internet and watch videos.

It also could help shape the terms of the next set of major auctions on spectrum for a wireless industry largely dominated by AT&T Inc, Verizon Wireless, Sprint Nextel Corp and Deutsche Telekom AG’s T-Mobile unit. Verizon Wireless is a joint venture between Verizon Communications Inc and Vodafone Group Plc.

Sprint and T-Mobile are seeking more airwaves, also called spectrum, to better compete against AT&T and Verizon Wireless.

Robert Quinn, AT&T senior vice president of federal regulatory policy, said the FCC’s decision was a dramatic break from years of solid precedent.

“We can’t help but worry that this seems intended to justify more regulation in a market where it is clear beyond doubt that regulation is simply unwarranted,” Quinn said.

After the open meeting, FCC Chairman Julius Genachowski told reporters that the facts and data in the report will help the agency make “the right decisions” on upcoming issues.

“In some cases that will be to do absolutely nothing,” he said. “In some cases it will be to take smart actions to spur competition.”

CONSOLIDATION EFFECT

His colleague, Michael Copps, one of three Democrats on the five-member panel, however, was more critical of some of the findings, calling them sobering and worrying.

“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,” Copps said.

“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.

All five FCC commissioners voted in support of the report, but the two Republicans expressed disagreement with some of the findings.

“I believe we actually should have made an affirmative finding of a competitive market,” Republican FCC member Meredith Attwell Baker said.

The industry has seen an explosive demand from consumers who increasingly surf the Web on mobile devices, especially smartphones. Demand is increasing faster for data than for voice services.

In August, the FCC began an inquiry into competition in the wireless industry. Under recommendations made in the National Broadband Plan, the agency is considering ways to provide more airwaves to wireless companies to meet a growing demand for mobile devices.

Chris Riley, a policy counsel at public interest group Free Press, praised the FCC for omitting the key phrase, but said the agency should have gone further.

“The market is largely controlled by two companies (AT&T and Verizon), and it will not dig itself out of this mess and magically produce competition,” Riley said. “Oversight and reform are badly needed.”

Verizon executive Kathleen Grillo said in a statement, “The U.S. has the most intensely competitive wireless market on the planet...Prices keep falling and usage keeps rising.”

Reporting by John Poirier; editing by John Wallace, Lisa Von Ahn and Leslie Gevirtz

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