The Federal Communications Commission has refused to conclude whether or not the U.S. wireless industry is “effectively competitive" in an annual report to Congress, but the agency revealed facts that are likely to influence regulators’ ultimate decision whether to approve AT&T’s $39 billion acquisition of T-Mobile USA.
The good news for AT&T is that an estimated six or more wireless providers offer coverage in about 76 percent of blocks established by the U.S. Census Bureau, covering 217.9 million Americans. The FCC’s annual mobile wireless competition report also finds that nearly five or more wireless providers offer coverage in nearly 90 percent of all blocks, reaching 255.5 million individuals.
But the agency warned that the number of facilities-based providers with coverage may not reflect the number of choices of service providers in an area because some wireless operators may have built coverage to serve customers based in other places.
Still, the statistics support AT&T’s argument that there is ample competition in the U.S. wireless market.
On the flip side, an index U.S. regulators use to analyze market concentration under a merger indicates the wireless market is highly concentrated already – before AT&T swallows T-Mobile USA, the nation’s fourth-largest mobile operator.
“The well-accepted metric for market concentration, the Herfindahl-Hirschman Index [HHI], remains above the threshold for a ‘highly concentrated’ market," FCC Commissioner Michael Copps said, commenting on the report.
In Horizontal Merger Guidelines issued last year, the U.S. Department of Justice and Federal Trade Commission classify a highly concentrated market as having an HHI of above 2500. As of mid 2010, the weighed average of HHIs by population across 172 economic areas rose to 2848. Parul Desai, policy counsel of Consumers Union, has said it’s estimated AT&T’s acquisition of T-Mobile USA would increase the index by another 650 to 700 points.
“Mergers that cause a significant increase in concentration and result in highly concentrated markets are presumed to be likely to enhance market power," the horizontal merger guidelines state, “but this presumption can be rebutted by persuasive evidence showing that the merger is unlikely to enhance market power."
