Michelle Connolly is a former Chief Economist of the Federal
Communications Commission. Indeed, the only person, I believe, to hold that
position on two separate occasions. Good cred.
Dr. Connolly is also a highly distinguished Professor of
Economics at Duke University, my alma mater. Another good cred.
Finally, Michelle is also a long-time member of the Free
State Foundation's Board of Academic Advisors. Another really good cred.
Please don't ask me to choose which of these is most
important!!!
No matter! Any one of them alone, of course, is sufficient
to spur me to recommend for your consideration Professor Connolly's new paper, Competition in Wireless Telecommunications:
The Role of MVNOs and Cable's Entry into Wireless.
You can find it here on the T-Mobile-Sprint merger website or here on SSRN. (Dr. Connolly acknowledges
that the report was underwritten by T-Mobile but states that the opinions
expressed in this report are hers alone.)
If you are
interested in better understanding the marketplace context of the proposed
T-Mobile/Sprint merger and the competition analysis that the regulatory
authorities are undertaking, I heartily commend the entire report to you. But,
in the meantime, here I highlight just a few key excerpts:
"This
report examines the competitive effects of Hybrid Mobile Network Operators
(HMNOs) — mobile virtual network operators that rely in large part on
self-deployed facilities — on the market for mobile wireless services and
recommends that the Federal Communications Commission (FCC) broaden its now
antiquated definition of the mobile telephony and broadband market to account
for HMNOs. HMNOs share certain characteristics of both facilities-based
carriers (Mobile Network Operators or MNOs) and non-facilities-based providers
of mobile services (Mobile Virtual Network Operators or MVNOs). An
understanding of MVNOs therefore partially illuminates the competitive impact
of HMNOs, but HMNOs are poised to play a competitive role in the wireless
marketplace that goes substantially beyond that of traditional MVNOs."
"HMNOs
use a combination of facilities to provide wireless service and are not as
reliant on MNOs as are pure MVNOs. Cable operator HMNOs own high-capacity network
facilities that enable them to offload a majority of the voice and data traffic
coming from mobile devices onto their fixed broadband networks. For example,
rather than relying solely on their MVNO agreements to use Verizon’s mobile
network, Comcast and Charter use their own extensive Wi-Fi hotspot networks to
deliver wireless service to their customers over wide geographic areas. Comcast
and Charter thus are providing wireless service using a hybrid strategy,
combining traditional non-facilities-based MVNO agreements and facilities-based
MNOs. (Emphasis in original.)"
"HMNOs
should be considered as part of the relevant mobile services market. Cable HMNOs’ entry into the
wireless market has already increased competition. The impact of this
intensified competition on price discipline will grow in the next couple of
years. Accordingly, any analysis of the mobile telephony/broadband market must
at the very least include HMNOs. (Emphasis in original.)"
On behalf of the Free State
Foundation, Senior Fellow Seth Cooper and I filed comments
and reply
comments in the FCC's proceeding to consider the proposed T-Mobile/Sprint
merger in order to provide context for the agency's consideration, including
the competition analysis. As with Professor Connolly's paper, if you are
interested in the merger, I hope you will review the FSF comments and reply in
their entirety.
Here is a brief excerpt from each
that, in relevant part, is consistent with Dr. Connolly's conclusions in her
paper.
From FSF's August 27 Comments:
"Wireless market entry by Comcast and Charter
Communications using hybrid Wi-Fi/cellular mobile wireless networks as well as
DISH Network’s planned launches of IoT and 5G networks diminish the likelihood
of significant price increases, post-merger. Commission precedents like the CenturyLink/Level 3 Order (2017) factor
such entry into the review analysis."
"Of course, reciting the market shares above might be
read to suggest that mobile broadband is a properly defined market for purposes
of competition analysis, but this likely is no longer the case. It is more
likely that wireless and wireline broadband services properly are part of an
overall broadband communications market – a broader broadband market, if you
will – as these two market segments become increasingly substitutable.
Traditional market definitions, such as a “mobile broadband” market, are now
likely to be overly narrow, just as "cable" is certainly outdated and
overly narrow as a meaningful product market definition."
From FSF's September 18 reply
comments:
"The Commission should reject any artificial rule demanding
four nationwide mobile wireless providers. Post-merger, consumer choices will
still include three nationwide mobile service providers, plus regional
providers, and hybrid Wi-Fi/cellular service providers Charter Communications
and Comcast. “New T-Mobile” would likely be a stronger competitor. And the
proposed merger would provide New T-Mobile an accelerated pathway for
nationwide 5G network coverage that neither provider would have by themselves."
Again, if you're interested in
knowing more about the dynamics of competition in the wireless marketplace, I
commend to you Michelle Connolly's newly-published paper, Competition in Wireless Telecommunications: The Role of MVNOs and
Cable's Entry into Wireless.
And while you're at it, you might also read the Free State Foundation's
comments and reply comments submitted in the FCC's T-Mobile/Sprint merger proceeding.
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