GAO: Wireless Prices Plummeting; Public Knowledge: We Must Regulate!

by on August 26, 2010 · 4 comments

So, the GAO recently released a report on the wireless industry and found that:

The biggest changes in the wireless industry since 2000 have been consolidation among wireless carriers and increased use of wireless services by consumers. Industry consolidation has made it more difficult for small and regional carriers to be competitive. Difficulties for these carriers include securing subscribers, making network investments, and offering the latest wireless phones necessary to compete in this dynamic industry. Nevertheless, consumers have also seen benefits, such as generally lower prices, which are approximately 50 percent less than 1999 prices, and better coverage.

Now, if you are a self-described “consumer advocate,” I would hope the bottom line here is pretty straightforward and refreshing: Prices fell by 50% in 10 years. That alone is an amazing success story. But that’s not the end of the story. The more important fact is that prices fell by that much while innovation in this sector was also flourishing.  Do you remember the phone you carried in your pocket — if you could fit it in your pocket at all — ten years ago?  It was a pretty rudimentary device.  It made calls and… well… it made calls.  Now, think about the mini-computer that sits in your pocket right now.  Stunning little piece of kit. It can text. It can do email. It can get Internet access. You can Twitter on it. Oh, and you can still make calls on it (but who wants to do that anymore!)

The point is, this is a great American capitalist success story that everyone — especially “consumer advocates” — should be celebrating.  So, what does Public Knowledge president Gigi Sohn have to say?

“These trends do not bode well for consumers, despite any benefits of the moment,” she told Ars Technica.

Wait, what?  Apparently no good deed goes unpunished. In the eyes of Public Knowledge, 50% price drops + stunning innovation = we need more regulation!  According to Ars, Gigi called for wireless net neutrality, text messaging regulation, an end to handset exclusivity, and more reasonable early termination fees.

What Gigi appears to be hung up on is the fact that, as the GAO reports, there has been undeniable consolidation in this sector since 2000. (Of course, that scale was essential to spreading faster networks nationwide).  But in Public Knowledge’s world, big is always bad.  All that counts is how atomistic competition is.  If we don’t have lemonade stands* on every corner, then, by God, to hell with the entire system, they say.  It makes no difference to them how well consumers did under that system. That’s the key take-away here.

But how asinine is this?  Again, isn’t consumer welfare what really counts?  Do we really care if we have 4 or 40 competitors? So long as prices are generally reasonable (or in this case constantly plummeting) and innovation is occurring at a healthy clip (which is certainly is here), then who cares how many players are out there?  Who’s to say to say that “X” is exactly the right number of competitors?  Markets determine these things. Public Knowledge apparently doesn’t like the fact that X currently is 4 instead of 40, or whatever it is they think meets their Goldilocks standard.  And, so, to get things just right, they would bring in the regulatory wrecking ball and have FCC bureaucrats start re-engineering this sector according to their own preferred design.

Oh, the rank hubris of it all!

Anyway, you’ll have to excuse me now.  Once I finish up this post to on my Droid (yes, I can blog on my fricking phone!!!!  How amazing is that, Gigi !!) I then need to get back to reading through my day’s Twitter stream (also on my phone) my RSS feeds (also via my phone) and then sort through the tens of thousands of games and apps in the Android marketplace to find my kids some new things to keep them entertained on a long car drive during vacation next week, where I will be using the Droid’s navigation system to find the hotel, while also searching for restaurants to eat at, while also…

Oh, you get the point.  Some people are just never happy.


P.S. To understand why “lemonade stand economics” are never going to work out well in high fixed-cost sectors like wireless, please see my post, “Wireless Networks & Lemonade Stand Economics.”   For more facts about how vibrantly competitive and innovative this sector is, please see:

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