• On September 30, 2005, the FCC adopted its Tenth Annual Report to Congress on the state of competition in the mobile telephone – or Commercial Mobile Radio Services (“CMRS”) – industry. This report examines the conditions prevailing in the CMRS marketplace as of the end of 2004 and the first half of 2005 (the report acknowledges that the Sprint-Nextel and ALLTEL-Western Wireless mergers have occurred, these transactions closed too recently for their effects to be reflected in the indicators of market structure, carrier conduct, and market performance). The FCC concluded that there continues to be effective competition in the CMRS marketplace based on its analysis of several measures of competition, including: the number of competing carriers providing service in an area, the extent of service deployment, prices, technological and product innovations, subscriber growth, usage patterns, churn, and investment. Although consolidation during the period covered by the report has reduced the number of nationwide mobile telephone carriers, the FCC found that none of the remaining carriers has a dominant share of the market and that the market continues to behave and perform in a competitive manner. The report notes that 97 percent of the total U.S. population lives in counties with three or more different operators providing mobile telephone service, the same level as in the previous year, and up from 88 percent in 2000 (the first year for which these statistics were kept); 93 percent of the U.S. population lives in counties with four or more different mobile telephone operators; and 87 percent lives in counties with five or more; both figures are roughly the same as in the previous year. Indicators of market performance show that competition continues to afford many significant benefits to consumers. During 2004, the number of mobile telephone subscribers in the United States rose from 160.6 million to 184.7 million, increasing the nationwide penetration rate to approximately 62 percent at the end of 2004. The amount of time mobile subscribers spend talking on their mobile phones has also increased, with the average minutes of use per subscriber per month rising to more than 580 in the second half of 2004, up from 507 in 2003 and 427 in 2002. Two indicators of mobile pricing – revenue per minute (“RPM”) and the cellular Consumer Price Index (“Cellular CPI”) – showed a continued decline in the price of mobile telephone service during 2004. The RPM, which can be used to measure the per-minute price of mobile telephone service, fell 12 percent during 2004, and the Cellular CPI declined 1.0 percent during 2004 while the overall CPI increased 2.7 percent. Finally, the volume of text messaging traffic grew to 4.7 billion messages per month in December 2004, more than double the 2 billion messages per month reported in December 2003.
  • The FCC, on October 31, 2005, approved two major telecommunications mergers after the companies involved agreed to conditions, which the agency’s chairman said were not all necessary. “I do not believe that all of the conditions imposed today are necessary,” FCC Chairman Kevin Martin said in a statement. “I believe that the affected markets would remain vibrantly competitive absent these conditions.” Commissioner Kathleen Abernathy supported the mergers and also criticized the conditions applied by the agency as “micromanaged regulatory oversight.” “I would have had less conditions and more embracing the competitive world in which we live,” she said. By a 4-0 vote, the agency’s four commissioners agreed to approve the acquisitions of AT&T by SBC Communications and of MCI by Verizon Communications. The FCC’s analysis of the competitive effects of the mergers focused on six key services: (1) special access competition, (2) retail enterprise competition, (3) mass market competition, (4) internet backbone competition, (5) wholesale interexchange (long distance) competition and (6) international competition. The Commission also adopted in its Order, as enforceable conditions, certain voluntary commitments made by the applicants. Some of those conditions are: (i) to not seek an increase in state-approved rates for unbundled network elements (UNEs) for two years (except for rates that are subject to current appeals in specific states), (ii) to implement a “Service Quality Measurement Plan,” which will provide the Commission with quarterly performance results for interstate special access services, (iii) to commit for 30 months not to increase the rates paid by existing in-region customers of AT&T in SBC’s region or MCI in Verizon’s region for wholesale DS1 and DS3 local private line services, (iv) to not provide special access services to themselves, their interexchange affiliates, or each other or their affiliates, that are not generally available to other similarly situated customers for a period of 30 months, (v) to commit for a period of 30 months not to increase rates set forth in SBC’s and Verizon’s interstate tariffs for special access services, including contract tariffs, that they provide in their in-region territory that are on file with the Commission on the Merger Closing Dates (vi) to provide, within 12 months of the Merger Closing Dates, DSL service to in-region customers without requiring them to also purchase circuit-switched voice telephone service, and (vii) to maintain for a period of three years peering arrangements with at least as many providers of Internet backbone services as they did in combination on the merger closing dates. The Justice Department approved the deals on October 27th, attaching only minor requirements that Verizon and SBC lease fiber lines to about 350 buildings apiece in their territories.

Authored by:
Gregg Mendenhall