The modern FCC competition-policy linchpin
When will the FCC acknowledge the obvious?
Every day many tens of millions of Americans competitively substitute wireless for wired communications and wired for wireless.
Everyone knows you can watch video or talk to someone over wired or wireless technology.
Everybody using the Internet knows you can access it over wireless or wired technology.
Every part of the mobile Internet revolution of smart-phones, tablets and other devices that enable users to surf, stream, and access Internet apps is about doing wirelessly what previously was done over a wire.
One of the most pervasively modern parts of our society today is how we all can communicate with each other seamlessly regardless of the technology used.
So why is it obvious to everyone but the FCC, that wireless and wired connections are interchangeable, competitive substitutes for American consumers?
The answer is simple and parochial.
Competitive reality threatens the FCC’s alternate reality where successful competition is a problem, because it threatens the FCC’s historical authority, power, and purpose.
If the FCC officially admits that American consumers competitively substitute wired and wireless technology offerings routinely, the FCC would have to concede that marketplace competition has been successful, leaving once-very-powerful FCC regulators with increasingly less to do going forward.
Just as the old adage goes, if you are a hammer all you see is nails; and if you are a regulator all you see is regulations to promulgate.
When will the FCC’s assessment of competition join the modern era?
Consider all the accumulating obvious facts that the FCC has to ignore to maintain its parochial fiction that wired and wireless technologies are not competitive substitutes.
For video, over fifty million American households watch video over cable wires. Over 30 million watch DBS over wireless. Several million watch video over fiber wires. A few million watch over copper wires. A few million watch broadcast TV wirelessly. Meanwhile, tens of millions of Americans watch video on smart-phones and tablets over wireless every day.
For voice, Americans have long embraced cordless phones connected to coax, copper, or fiber wires. And wireless cellular service or Wifi-enabled voice services over apps (like Skype or Facetime) use fiber wire backbones.
According to the CDC, 38% of Americans have a wireless phone only, 51% have both wireless and wired phones, and only 9% have only a wired landline telephone.
For broadband Internet access, Americans routinely use wireless Wifi services connected to wired connections of coax, copper or fiber. And wireless smart-phones, tablets and laptops serve as Wifi hotspots for other devices too.
Those who quibble that wireless may not be as fast as some wires miss the point.
The issue for consumers is whether wireless is fast enough for their needs. And since most Americans have little need for speeds in excess of what 4G wireless and fixed wireless services can deliver, wireless is fast enough for what most Americans do most of the time, because they put a premium on the convenience of mobility.
Practically, there is little a wire can do that wireless can’t do and vice versa. The rare instance where they may not be competitively substitutable increasingly is the exception not the rule.
In short, if asked, most Americans would laugh at the notion that wired and wireless technologies were separate services that could not be substituted or did not compete with one another every day for their attention and business.
Prospective FCC Chairman Tom Wheeler knows better than most anyone that wired and wireless are technological and competitive substitutes. That’s because he twice led innovative industries proving the mass-market, competitive-substitution case in the real world: first from wireless to wired, and second from wired to wireless.
Mr. Wheeler led the cable industry’s association from 1979 to 1984, when cable wires competitively substituted 25 million wireless broadcast TV households. He pioneered a period of 360% industry growth, from 9 million to 34 million household subscribers, per NCTA.
Amazingly Mr. Wheeler did it again. He led the wireless industry’s association from 1992 to 2003, when wireless phones competitively substituted many tens of millions of landline wired telephones. Again he pioneered a period of 1,645% industry growth, from 9 million to 148 million subscribers, per CTIA.
In sum, proponents of broadband-regulation try to imagine away competitive substitution of wired and wireless technologies and services.
They seek to unilaterally shrink market definitions to deem cable broadband a monopoly and wireless broadband a duopoly of Verizon and AT&T, despite the overwhelming competitive substitution and competition evidence to the contrary.
If they can get away with denying the existence of broadband competitive substitution, they then can try and assert that 1996 congressional competition policy is fatally-flawed, warranting more FCC intervention relying on the FCC’s obsolescing 1934 authority that conveniently presumes monopoly markets.
Hope springs eternal that a data-driven, expert agency, FCC will acknowledge the linchpin of a modern FCC competition policy: the obvious technological and market reality of competitive substitution of wired and wireless providers, products, and services.
Scott Cleland is Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests and President of Precursor LLC, a research consultancy for Fortune 500 companies. Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration.