GAO Report Addresses Benefits, Concerns of Wireless Industry Consolidation

WASHINGTON, August 26, 2010 – A new government report released publicly on Thursday reviews changes in the wireless industry since 2000 and addresses its effects, including carrier consolidation and competitiveness.

Rep. Ed Markey, D-Mass., requested the report from the Government Accountability Office when he was chairman of the House Commerce subcommittee focusing on telecommunications and the internet. The GAO report was released Thursday by Democratic Reps. Markey, Rick Boucher of Virginia and Henry Waxman of California.

The report found that since 2000 there has been an increasing amount of consolidation among the wireless carriers. There are currently four nationwide carriers; Sprint, T-Mobile, AT&T and Verizon with 11 small or regional carriers. Additionally, there are 60 mobile virtual network operators.

The use of these services has increased exponentially, nearly 40 percent of Americans use wireless phones as their primary phone.

However, the GAO concludes that the Federal Communications Commission needs to do more to obtain data about the industry.

The “FCC should assess whether expanding its original data collection of wireless industry inputs and outputs—such as prices, special access rates, capital expenditures, and equipment costs—would help it better satisfy its requirement to review competitive market conditions with respect to commercial mobile services,” recommends the report.

“The GAO’s report holds good news for consumers – they generally benefit from lower prices for wireless phone service and better coverage,” said Boucher, chairman of the Subcommittee on Communications, Technology, and the Internet.  “But the report also indicates that the commission should improve its data collection with respect to the effects that some industry practices may have on consumers.  I urge the commission to consider the GAO’s analysis and to continue to work with stakeholders to ensure that all Americans continue to benefit from widely available and reasonably priced wireless communications services.”

Public Knowledge President Gigi Sohn, said: ““The report shows the large companies continue to pile up advantages in gaining more spectrum, in exclusive deals for handsets and in locking in consumers with high termination fees.  At the same time, there is the equally disturbing trend that the investments larger carriers are making in their networks are a smaller proportion of their service revenue than the expenses of smaller carriers.  High special access rates imposed by the wireline affiliates of the larger carriers also hamper competition.”

Free Press Policy Counsel M. Chris Riley said in a statement: “The GAO’s findings, together with the FCC’s recent report on wireless competition, paint a clear picture of an increasingly concentrated industry, in which competitors and consumers pay high prices to pad the high profit margins of AT&T and Verizon. Inflated backhaul costs, misguided spectrum policies and exclusive rights to popular devices have fostered an environment where companies cannot compete on a level playing field. With the lack of competition, consumers are paying the price through early termination penalties, hidden and vague usage restrictions, and non-transparent, nonsensical charges and fees.”