It would be difficult to find any issue about which there is more disagreement in the U.S. communications industry than the degree of competition that now now exists, or the prospects for more competition in the future. That, in face, lies squarely at the center of debates about AT&T’s proposed acquisition of T-Mobile USA.
Some would argue there is plenty of competition, even after the acquisition, while others say a dangerous duopoly is developing. Smaller and independent local exchange carriers and competitive local exchange carriers have their own reasons for citing, and worrying, about market power.
Some will point to the potential emergence of LightSquared, Clearwire and now Dish Network as evidence that markets are competitive, and will remain so in the future. It is not an ungrounded hope.
As Roger Entner, Recon Analytics founder points out, Dish Network is the country’s third largest subscription TV provider with more than 14 million customers.
With a possible ability to amalgamate 40 MHz of re-purposed satellite spectrum to build a national broadband network, Dish Network will be positioned as a formidable provider of broadband Internet access, TV and mobile services, reaching a greater population than AT&T, CenturyLink, Comcast, Cox, or Verizon, Entner argues.
Of course, skeptics will say all these efforts are just that–efforts–not accomplished deeds. Clearwire and Lightwave each have serious funding challenges and Dish Network will have to raise significant capital as well.
Of the services Entner notes, all are mature services, and it appears some are about to enter the declining phase of their product life cycles. How Dish Network could steamroll into wireless
Subscription TV is the clearest example, along with fixed-line voice. But mobile voice, and now event texting, are starting to peak as well. Fixed-line broadband is virtually saturated and mobile broadband remains the one clear growth segment at the moment.
Observers do expect big new businesses to emerge, but it isn’t clear those businesses will primarily benefit smaller and upstart firms in the business. Also, wholesale-only business models at the national level have rarely, if ever, succeeded. Clearwire likely will be acquired relatively soon and Lightsquared has yet to prove it can attract enough customers to reach break even. Dish Network’s strategies are less clear, and likely would include a combination of wholesale and retail services.
Charlie Ergen is used to scrapping with more-powerful competitors. But market share in the communications business is a stubborn thing. It won’t take much for AT&T and Verizon Wireless to further cement their leadership of the U.S. mobile business, for example.
That doesn’t mean LightSquared, Sprint, Clearwire and Dish Network could not potentially be important competitive forces. But a realist would say that all markets, over time, become highly concentrated, for reasons embedded in the competitive process itself. That isn’t to say anybody has to agree that AT&T or Verizon Wireless necessarily have the “best” (insert key attributes here).
You only have to recognize the customers, for whatever combination of reasons already have made those two firms the dominant U.S. wireless providers. Value, overall, is only partly a matter of having the best attributes in every sense.
Price, handset selection and other forms of uniqueness and value, including the value of bundled services of other types, have made AT&T and Verizon the leaders, despite any deficiencies observers might rightly cite.
Spectrum alone and pricing alone have not proven to build reliable value for contestants and consumers in the past. Those dynamics will not change as LightSquared, Sprint, Clearwire and Dish try to break through.
Paradoxically, there is lots of competition in the U.S. communications business. Paradoxically, that competition ultimately still will lead to a highly-concentrated industry, for access services. Applications might someday be a different matter, though, at least up to a point.
Competition is a good thing, and is something the U.S. communications market features in quite some variety. Whether that is likely to hold for access services, though, is highly debatable.
If the Pareto theorem holds, and many of us believe it must, the U.S. communications market inevitably will consolidate to the point that the overwhelming amount of market share is held by a small number of companies. It wouldn’t be quite rational to expect anything less.