Appreciating Wireless Dynamism

Abstract

Over the last several years, nearly every aspect of the burgeoning mobile broadband ecosystem – from networks and handsets to operating systems and location-based services – has been scrutinized. Indeed, policymakers and regulators at the federal, state, and local levels, along with the courts, have weighed in on a range of transactions, market developments, issues impacting network deployment, and legal issues arising in this space. While there appears to be general agreement on some core issues impacting this sector (e.g., the need for additional spectrum), there is fundamental disagreement over whether and to what extent this sector is competitive and how to assess that foundational issue. The Federal Communications Commission has, for example, declined to label the wireless space as “effectively competitive.” This skepticism is based on an overly simplified notion of how markets should work. According to this view, only the number of firms in a market and their corresponding market shares matter when assessing competition. Consumer welfare gains, on the other hand, are largely marginalized in this analysis. Market share is certainly not an irrelevant consideration, but in the modern wireless ecosystem, where service providers work in tandem with device manufacturers and content producers to deploy cutting-edge services and where wireless broadband is being used to transform entire sectors, the traditional analytical framework tends to undervalue the enormous amount of creative destruction and consumer-focused innovative dynamism that has long been present in this space. As discussed in this paper, continuing to rely on such a narrow conception of competition is wrongheaded and dismissive of the many consumer welfare gains being generated throughout the mobile ecosystem.