Deleted Scene from my NPRM Filing

by on January 14, 2010 · 10 comments

In my researching the wireless competitive picture for my comments on the FCC Network Neutrality NPRM, one of my contacts was kind enough to point me to a Bank of America/Merrill Lynch paper that used the Herfindahl-Hirschman Index (HHI) to compare the market concentration of wireless service providers in the 26 Organization for Economic Co-Operation and Development (OECD) countries.  HHI is one of the metrics used by the Department of Justice to determine market concentration. It is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. For example, for a market consisting of four firms with shares of 30, 30, 20, 20 percent, the HHI is 2600 (302 + 302 + 202 + 202 = 2600). The higher the number, the greater the market concentration. When the formula is applied to the U.S. wireless market share percentages determined by Bank of America/Merrill Lynch (28.5, 26.7, 18.2. 12.1 and 14.5), the U.S. HHI is the smallest at 2213. This number is substantially less than the HHIs for all the other OECD companies with the exception of the U.K.  Otherwise, no other HHI is under 2900.

Here’s the OECD market share data for Q4 2007 as it appears in the Bank of America/Merrill Lynch’s Global Wireless Matrix.

Based on the HHIs derived from this data, here’s how OECD countries rank going from least concentrated to most concentrated.

Country                    HHI

U.S. 2213.04
U.K. 2243.32
Germany 2917.74
Italy 3028.27
Poland 3058.9
Canada 3106
Australia 3118.94
Austria 3265.49
Denmark 3343.29
Sweden 3360.37
Greece 3430.66
Spain 3491.38
Finland 3500.11
Czech Rep. 3543.39
Belguim 3548.26
Japan 3596.69
Portugal 3625.98
Hungary 3638.83
Netherlands 3742.65
France 3807.74
Korea 3866.5
Turkey 4102.34
Switzerland 4564.61
New Zealand 5014.58
Norway 5058.32
Mexico 5647.88

I used some examples in my comments, although I refrained from showing the data from all 26 countries. However, I thought it would be interesting to post, simply because the case for network neutrality is based on the false premise that U.S. service providers are consolidating into fewer and fewer companies. Second, many of the advocates of Internet regulation ironically point to Europe and Asia as the model for better competition, when, in truth, it is in these markets are far more concentrated.

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