Thursday, April 25, 2013

The FCC’s Role in the Two Plus Two Wireless Market

           The U.S. national wireless market cleaves between AT&T/Verizon, with a combined 70% market share, and Sprint/T-Mobile, barely able to afford essential next generation network spectrum.  How did AT&T and Verizon become so dominant?  A lot has to do with deep pockets and the ability to make the necessary capital expenditures for growth.  Hats off to these carriers for taking the risk.

            But as much as AT&T and Verizon desire recognition, they had a silent partner who facilitated a powerful first mover advantage: the Federal Communications Commission.  The FCC created a “wireline set aside” back in 1981 granting 40 MHz of free spectrum to incumbent telephone companies.  Of course these carriers took the risk to invest in a new mobile wireless radio technology, but how could they lose having received one of the most expensive components free of charge?  Additionally the FCC granted them a tremendous market entry headstart as second carrier market entry could occur only after a comparative hearing often among a dozen or more applicants.

           AT&T and Verizon have successfully leveraged their first mover advantages and they will not let anything or anyone prevent them from capturing great rents.  Not even the FCC.

            So if and when the FCC considers whether to confer any sort of new spectrum access opportunity for lesser carriers—as recommended by the U.S. Department of Justice—expect AT&T and Verizon to scream bloody murder.  What was good for their goose is not okay for the lesser ganders now.

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