Yesterday, Verizon Wireless filed comments [PDF] with the FCC ahead of its 17th annual mobile competition report. This post is excerpted from our executive summary.
The mobile wireless marketplace is even more robust, competitive, and innovative than it was last year and the year before. Output is increasing, prices are decreasing, and there is massive, ongoing investment and innovation that is fueling even more competition – all to the benefit of the U.S. wireless consumer. Competition is being driven not only by mobile carriers but from a large and increasing variety of device and application suppliers, resellers, over-the-top providers, and other entrants across the mobile ecosystem, enabling consumers to “mix-and- match” services, devices and applications that are both complements and substitutes. Indeed, not only is the U.S. wireless consumer experience the best in the world, it is constantly getting better. The facts are clear – the mobile wireless market is “effectively competitive” for the American consumer.
The market for mobile wireless services itself is highly competitive. Mobile data traffic has soared more than 275% since 2010. And prices keep falling. Between 2005 and 2012, the wireless CPI fell 8.0%, while the overall CPI for all items increased 16.7%. For data services, the price declines were even more dramatic: the effective price per megabyte (“MB”) fell 50% from $0.06 per MB in 2011 to $0.03 per MB in 2012. Consumers can choose from an increasingly diverse array of innovative pricing plans and options, such as postpaid plans, prepaid offerings, tiered pricing plans, unlimited and capped usage plans, and shared and multi-device plans.
Carrier competition on non-price factors – particularly network enhancements – is also improving consumer welfare. In 2012 alone, mobile carrier capital expenditures topped $30 billion, a nearly $5 billion increase – almost 20% – from the year prior. These investments have poured into 4G network deployments and, as a result, the U.S. now has nearly 50% of the world’s LTE subscribers despite having only 5% of the global mobile consumers. This staggering level of investment is driven by competition, and consumers are the beneficiaries. As a result, U.S. consumer satisfaction levels remain strong: a recent survey reflects that 91% of wireless phone customers are highly satisfied with their wireless phone service.
The dynamic consumer experience for wireless services is supported by numerous and diverse participants – from mobile carriers and MVNOs to non-traditional and emerging sources of competition across the mobile ecosystem – making a carrier-centric competitive analysis anachronistic. The MVNO segment has continued to grow, with TracFone ranking fifth among all providers of mobile service. Consumers build their wireless experience to meet their needs by choosing among a vast array of devices, apps and other services, and non-traditional sources of connectivity are expanding: Consumers are now making phone calls using over-the-top mobile apps riding on a data plan or over WiFi networks, thereby displacing traditional voice services. And increasingly ubiquitous WiFi is serving as both as complement to and a substitute for traditional mobile broadband services.
The market’s competitiveness is also evidenced by the ability of new providers to enter as well as the attractiveness the market holds for new investment. The billions of dollars that SoftBank and Deutsche Telekom are investing in Sprint and T-Mobile underscore that major international firms are confident of their ability to compete successfully in the U.S. wireless market. While more spectrum is needed, the AWS and 700 MHz auctions, together with the removal of restrictions from the BRS/EBS, 2 GHz MSS, and WCS bands, have provided opportunities for entry and capacity to address growing spectrum needs. And the robust secondary market in which literally thousands of spectrum transactions occur each year among small, medium and large carriers also allows spectrum to flow to its best and most efficient use, drives further investment, again all to the benefit of consumers and the economy.