Because the Key to Wireless Competition is More Bureaucracy

If the FCC is to pursue "jurisdiction over everything," what's next on its list? How about the wireless industry?

Tomorrow, the FCC will release yet another report on the state of the U.S. wireless industry. Its last report, in 2008, reported that the industry is competitive—a conclusion I agree with. It's not yet known how tomorrow's report, which will rely on data collected in 2008, will read. But if the report were to decline to label the industry competitive, as multiple industry-connected sources I've spoken to believe is likely, it would almost certainly signal that the agency is intent on clearing the way to impose a wireless version of the Net neutrality regulations that have been giving it so much trouble recently.

It's pos

sible to make a reasonable argument that the country's wireline broadband industry is insufficiently competitive (though that doesn't make regulation necessary). But contrary to the constant protestations of folks like Columbia University's Tim Wu, the wireless phone market, while certainly imperfect, is far from short on competition.

By at least one measure, the U.S. market is the least concentrated in the OECD. Other reports make strong cases that innovation is thriving. And according to CTIA, an industry group representing wireless companies, the U.S. wireless market services more than 600 devices and is one of only two countries with more than five wireless providers.

Some of those are industry-provided figures, so feel free to take them with a grain of salt. But I think when it comes to the basic question—do wireless-industry customers lack choice of devices, networks, or applications?—the answer is pretty clear: No. And part of the reason, particularly when it comes to devices, is that competition has already worked.

When wireless Net neutrality first became an issue in 2007, Wu wrote a paper that focused on the then-new iPhone. He suggested that Apple's exclusive contract with AT&T was a reason to impose a rule that would require all carriers to open up their networks to any device. And, he argued, doing so would spur innovation amongst device makers who could be assured that their devices wouldn't be limited to a single network.

But what he missed was that allowing carriers to cut exclusive deals with phone makers would create incentives for carrier/device-maker partnerships to create new phones. And that's arguably a big part of the reason why consumers now have a fleet of high-end smartphone alternatives to the iPhone. After the success of Apple and AT&T, both carriers and device-makers wanted a must-have smartphone of their own.

Are there legitimate gripes about wireless service providers? Absolutely. There are weeks when I'm pretty sure my AT&T-connected iPhone drops more calls than it doesn't. But, thanks in large part to increased mobile web access and speed, I'm far happier with my wireless service now than I was a few years ago—which may help explain why overall wireless customer satisfaction ratings are on their way up. I think if anything, what the last few years have demonstrated is that although the wireless market is imperfect, it can and will improve—and without FCC meddling .

Last summer, I noted early indications that the FCC might be pursuing wireless Net neutrality.