The Unfinished Spectrum Revolution

by on January 16, 2009 · 11 comments

It has been suggested that the American wireless market is a “textbook oligopoly” in which the four national carriers have little incentive to innovate or further reduce prices. I’m more sympathetic to this argument than some libertarians, but over at Techdirt Carlo offers some evidence that competition is alive and well in the wireless marketplace. For a while, the national carriers have offered unlimited voice and text messaging services for around $100/month. Carlo notes that a couple of regional carriers that focus on the low end of the market and have less comprehensive coverage maps have started offering unlimited connectivity for as little as $50/month. The latest development is that Sprint’s Boost Mobile unit is joining the $50/month flat rate club.

Jim Harper has made the point in the wired broadband market, but it deserves to be made here too: competition happens along multiple dimensions. Consumers have different trade-offs between price and quality, and so products with different feature sets and price points often compete directly with one another. There may be only four national carriers, and the regional carriers may not be able to offer service that the typical consumer finds comparable to the offerings of the national networks, but that doesn’t mean the regional carriers are irrelevant. Offering a bargain option at the low end of the market really does put pressure on the margins of the tiers above them. As long as there are some AT&T and Verizon customers who would be willing to put up with spotty coverage in exchange for a lower phone bill, AT&T and Verizon will have an incentive to cut their prices over time.

Of course, we could use more wireless competition. But we also shouldn’t lose sight of how much good the spectrum that’s already been auctioned off has done. It’s hard to create competitive telecom markets. For all of its flaws, the mobile industry is a real success story. And the solution to the flaws is to continue what we started 15 years ago: auctioning off more spectrum and creating real property rights in the airwaves.

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