GAO Asks FCC to Take Closer Look at Wireless Market

New report from Government Accountability Office finds Federal Communications Commission needs to step up data collection to evaluate competition, pricing and consumer practices.

By Kenneth Corbin | Posted Aug 27, 2010
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Government auditors are calling on the Federal Communications Commission to take a closer look at the wireless industry, concluding in a report released this week that the agency needs to step up its data-collection practices to evaluate a host of market conditions including competition and pricing.

The Government Accountability Office report, commissioned by a trio of House Democrats, surveyed the wireless market over the past decade, finding that over a period of extensive consolidation in the industry, consumer prices have fallen by roughly 50 percent while coverage has improved.

At the same time, the study raised questions about several industry practices, including the early termination fees and handset exclusivity agreements that make it harder for consumers to switch providers, as well as the prices -- known as special access rates -- that large, nationwide providers charge smaller carriers for access to their facilities.

The report also highlighted the ascendancy of the wireless sector, noting that industry-wide revenue now tops $150 billion a year, while nearly 40 percent of households rely primarily or exclusively on their mobile devices.

In particular, the GAO report recommends that the FCC improve its methods of collecting data that inform the annual report on wireless competition that it is required to deliver to Congress. The auditors noted that the FCC has recently made efforts both to broaden its collection efforts and to obtain more detailed information about industry practices, but more still needs to be done.

"While FCC recently undertook steps that significantly improved this report, it still does not fully assess some key industry inputs and outputs," the auditors concluded. "FCC generally has not collected data on many industry investments or consumer switching costs because of the complexity and burden associated with gathering these data."

The three lawmakers who commissioned the report, Reps. Henry Waxman (D-Calif.), Ed Markey (D-Mass.) and Rick Boucher (D-Va.), who chair the Energy and Commerce Committee and two of its subcommittees, respectively, hailed the report for providing direction to the FCC to look more closely at key areas of the wireless industry that have come under increasing scrutiny in recent years.

"Over the past decade, consumers have benefited from significantly lower prices for wireless services and better coverage," Markey said in a statement. "Still, issues such as early termination fees charged by carriers -- which raise concerns both from a consumer protection and a competition standpoint -- handset exclusivity arrangements, acquisition of spectrum and industry consolidation all should be closely examined."

While the GAO report noted the significant consolidation that has reshaped the wireless market over the past decade, and relayed the concerns of local and regional providers that they have difficulty attracting consumers amid competition from four nationwide providers, it did not make specific policy recommendations for the FCC to intervene in the market.

CTIA, the principal trade association representing wireless carriers, responded to the report in a statement reiterating its view that the industry is marked by vibrant competition.

"With more than 91 percent of Americans being able to choose from four or more carriers, competition for subscribers is fierce," CTIA President and CEO Steve Largent said. "If a consumer doesn't like something about one provider, he or she has many others from which to choose."

CTIA had a more pointed reaction to the FCC's most recent report on the wireless industry, in which the agency concluded that competition in the sector was less than effective and hinted at the use of "policy levers" to remedy the situation.

In response to that report, Largent warned against any "misguided and harmful" regulations that might emerge from FCC intervention.

Kenneth Corbin is an associate editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.

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