Monday, March 10, 2014

U.S. Wireless Market is Competitive, Despite What Son May Say

Wireless market observers have been buzzing about the rumored acquisition of T-Mobile by Sprint for months now. Sprint has not made an official merger offer to T-Mobile, and Softbank and Sprint have repeatedly declined to comment on the possible transaction with T-Mobile. But recent actions by Masayoshi Son, head of SoftBank Corp. and Chairman of Sprint Corp. have certainly shown that Mr. Son means business. After U.S. antitrust officials voiced opposition to the acquisition, Mr. Son announced plans to make a presentation to the Chamber of Commerce in Washington, D.C. on March 11 to argue the merits of a merger between the wireless providers.

It is all well and good for Mr. Son to state his case wherever he wishes. But he has been vocally critical of the U.S. wireless market in making his arguments for approval of the rumored transaction. In particular, he has charged that Verizon Wireless and AT&T dominate the U.S. market and keep the costs of data communications high. The Wall Street Journal [subscription required] recently quoted Son saying, “The U.S. has one of the world’s highest mobile fees,” and the principles of competition aren’t working. Presumably he is tossing out these allegations to support his claims that Sprint needs more scale to compete with the top-two providers.

Unfortunately for Mr. Son, his claims are not supported by marketplace realities. There is plenty of evidence that the U.S. wireless market in fact offers its consumers some of the best prices and value for service in the world. For example, the Organisation for Economic Cooperation and Development (OECD) found in its most recent publication of Communications Outlook 2013 that U.S. pricing was more favorable than Japanese pricing for handsets/smartphones for 10 out of the 11 baskets or service bundles it studied. Further, the most popular mobile service bundle in the U.S. was 290% more expensive in Japan. The only market segment in which Japan led the U.S. in price was for USB sticks, which accounts for less than 3% of U.S. mobile connections. Overall, Japanese prices averaged 55% higher than U.S. prices.

The results of the mobile baskets price comparison compiled from the relevant tables in OECD’s publication are presented the chart below.

* Source: OECD Communications Outlook 2013, available at This chart is compiled from the various numbered charts in the left-hand column.

In addition to offering better price options for mobile baskets than Japan, the U.S. wireless market also offers consumers more advanced networks to support their wireless service. For instance, competition for speed and data-hungry consumers has driven service providers to invest $34 billion in network upgrades and development to build out 4G LTE networks in 2013 alone. This historic level of investment ranked 4th in the world according to OECD, and amounted to more than any other U.S. industrial sector invested in 2013. In contrast, Japan ranked 12th in investment according to OECD.

U.S. investments led to over half of the world’s 4G LTE subscribers being here in the U.S., despite the fact that only 5% of the world’s wireless subscribers in the U.S – nearly double that of Japan. And over 97% of the world’s smartphones sold in 2013 run on operating systems developed by U.S. companies.

Finally, despite whatever Mr. Son may say, competition is alive and well in the U.S. wireless market. The remarkable investment in U.S. wireless 4G LTE and broadband networks have enabled providers to offer consumers a wide range of choice in networks, devices, applications, and subscription plans. The FCC reported that at by the end of 2012, the U.S. had more facilities-based wireless service providers that own and manage network equipment than any other country in the world, and nearly all U.S. consumers have a choice of three or more mobile voice carriers; 97.2% of the U.S. population is covered by three or more mobile voice carriers and 92.8% is covered by four or more mobile voice providers. 

Regarding mobile broadband, 91.6% of the U.S. population is served by three or more mobile wireless broadband providers and 82% are served by four or more providers. Additionally, U.S. consumers have a choice of nearly 300 different handsets, and more than 3.5 million apps for 14 different mobile device operating systems. And recent trends indicate that investment, consumer demands, and disruptive technologies will continue to drive fierce competition in the wireless marketplace in the future.

All this is to say, when Mr. Son comes to town on March 11, skepticism is warranted regarding his claims that U.S. wireless consumers somehow are less well off than those in Japan, or anywhere else in the world for that matter. If Mr. Son wants to argue in favor of a merger between Sprint and T-Mobile, he can surely do so. But despite whatever Mr. Son may say, the U.S. wireless market is dynamic, competitive, and offers consumers some of the best prices and value for service in the world.