Wireless Prices & Investment Illustrate Well-Functioning Market

by on December 15, 2010 · 4 comments

Richard Bennett brought to my attention the release of the latest CTIA Semi-Annual Wireless Industry Survey. Lots of interesting facts worth examining.  I took two of the charts that appeared in the report and mashed them up to created this chart for the Mercatus Center depicting what has been happening with prices and investment in this sector.  Down below, I note why this is important.

Although it remains subject to some regulatory burdens and a variety of punishing taxes and fees, America’s wireless marketplace can be considered a great deregulatory success story. Over the past two decades, the cellular marketplace has generally been treated with a lighter regulatory touch than wireline communications and other sectors that the Federal Communications Commission regulates. The result of that light-touch approach speaks for itself.

Cumulative capital investment has grown from just $2.6 billion in 1988 to just under $300 billion in 2010. That is a stunning level of investment growth in capital-intensive sector. Meanwhile, prices plummeted throughout the 1990s and then plateaued over the past decade. While average local monthly bills stood close to $100 in 1988, today monthly service averages just $47. Importantly, however, the quality-adjusted price of service has improved markedly over the past decade. Consumers are getting much more for their money today than they did in the past. Internet access, texting, video, games, movies, and much more are all available over mobile handsets today. It’s not hyperbole to suggest that what we are carrying in our pockets and purses today is really more akin to a computer than a phone. Yet, competition and innovation keeps prices in check.

These statistics suggest that calls for more aggressive regulation of the wireless sector are unwarranted and would likely have a deleterious impact on consumer welfare.

  • Ryan Radia

    Nice chart. It might be worth noting next to the Y axis that the dollar amounts are in thousands, in case some readers don’t bother to read your full explanation of the chart.

  • Anonymous

    Is that nearly $300 billion of annual investments? $300 million is way too low as AT&T alone invested $19 billion in 2010 on wireless upgrades.

  • Anonymous

    I just looked at the source. The capital investment should be billions, not millions.

  • http://www.techliberation.com Adam Thierer

    Geroge… You didn’t read far enough down to were I note we are talking in Billions. But you and Ryan are correct that I forgot to label axis appropriately.

Previous post:

Next post: