2 Comments

Summary:

The FCC today released a 237-page report detailing the state of competition in the wireless industry. The report offers no conclusions, but I’ve taken several of the images provided in the report to paint a picture of the industry that shows it’s very profitable.

The FCC today released a 237-page report detailing the state of competition in the wireless industry. But while it offers no conclusions, it does broaden the scope of information way beyond the radio access network — basically access to the pipe — looking at everything from the backhaul and spectrum all the way to the apps:

Each one of these images offer up a view of how the wireless industry is a source of revenue and profits to the carriers, applications providers and Internet companies. So let’s start with basic access to wireless. At least 90 percent of the country has four providers from which to choose service:

And those providers aren’t doing too badly for themselves, with margins for the top seven providers ranging from 20 percent to as much as 40 percent for Verizon:

Even when one takes into account the billions ($20.2 billion in 2008, according to the CTIA, or $25.5 in 2008, according to the Census Bureau) in capital investment, the large carriers are still making money:

However, the consumer is paying less on a monthly basis as measured by the average revenue per user. The consumer is also using data services such as mobile broadband and texting more than voice, with voice minutes declining for the first time in a decade during 2008. Average minutes-of-use per subscriber per month (MOUs) declined to about 708 minutes for the six months ended December 2008, down from 769 minutes in the same period in 2007:

And depending on the device, that increase in data use can be lucrative, but the industry hasn’t indicated at what point data consumption will begin to eat into profits or push them into a loss, although the rhetoric has been strong:

And that’s perhaps the key to wireless competition and innovation. If the carriers can’t profitably deliver the bandwidth that applications and consumers demand, then innovation may come to halt while folks work on cramming more bits into the available spectrum. But if carriers are able to anticompetitively clamp down on usage through industry-wide high prices, restrictions on certain applications or opaque network management tactics, then innovation may also grind to a halt. Really, the FCC is missing a key piece of data, which is how much it costs carriers to deliver all those bits in the first place. For example, it looks like Verizon has figure out how to do this better than its competition.

Related GigaOM Pro content (sub req’d):
Everybody Hertz: The Looming Spectrum Crisis

You’re subscribed! If you like, you can update your settings

  1. Brian S Hall Thursday, May 20, 2010

    Very useful charts and analysis. Thanks!
    Verizon is doing quite well. Nice to see that for all our service provider issues that 90% of Americans have a choice of at least 4 carriers. I’m a bit suspicious about that number but hope it’s correct.

  2. The Good, the Bad and the Ugly of AT&T’s New Pricing Plan Wednesday, June 2, 2010

    [...] the pricing plan says a lot about the state of wireless competition in the U.S. Recently, the FCC issued a report on the status of competition in the wireless industry that laid out how, from an infrastructure point of view, AT&T and Verizon have clear advantage. [...]

Comments have been disabled for this post