Does strong competition mean wireless could surpass wired broadband in the near future?

This week, the Federal Communications Commission (FCC) will officially confirm that the US wireless marketplace is characterized by effective competition. That shouldn’t surprise consumers who have been playing wireless carriers against each other in search of the best deals that match their needs on pricing and data. Increasingly hotter competition among the four national carriers means that consumers are able to use more data than ever before and generally pay less for it — just as economic textbooks say should happen in a contested market.

Via Twenty20

The anecdotal experience of consumers is backed up by cold hard facts in the FCC’s full report. Perhaps most compelling, in the past two years, number-three carrier T-Mobile has bested the market’s two top dogs, AT&T and Verizon, when it comes to signing up new subscribers. The data also show steep price declines. The Labor Department’s Consumer Price Index — the most widely watched measure of inflation for consumer goods and services — shows a 13.2 percent drop in the cost of wireless telephone services over the past year (August 2016 to August 2017), while overall consumer prices rose 1.9 percent. In a growing economy, that only happens when companies have to compete hard for business.

Given the facts, the Commission’s finding that competition exists shouldn’t be surprising. But its conclusion marks an important break with the agency’s recent behavior. Today, though, even some on the political left who often snipe at wireless providers concede the reality of strong competition among the national wireless firms. Harold Feld, a senior vice president at Public Knowledge, acknowledged in a recent blog that the wide availability of unlimited data plans is one of the “very real benefits of four-firm competition in most of the country.”

Perhaps even more significant than where the market stands today is where it is heading tomorrow. Here too, there is good news about competition. The arrival of 5G wireless technology, which will enable consumers to access even larger amounts of data at higher speeds than ever before, should shake up the market by creating new challenges to cable TV companies’ dominance of wired broadband services. In recent years, consumers have increasingly signaled that they prefer the freedom provided by wireless connectivity to accessing the internet from a single, fixed location. But because wired broadband has continued to provide more reliable access to larger amounts of data, most Americans have opted to pay for both wired and wireless connectivity to get the most out of the internet. 5G could change that dynamic.

As this new generation of wireless service takes hold, it seems likely that most Americans will no longer have a reason to buy both types of service. Peter Rysavy, an engineer whose firm has been examining wireless technology issues for more than two decades, says that “eventually consumers will pay for just one broadband connection, fixed and mobile.” He sees 5G as “a serious threat” to the wireline-only companies because it will enable consumers who generally prefer wireless to abandon wired broadband altogether.

Wired broadband is a big contributor to cable companies’ bottom line, and they will fight hard to keep those customers, which should mean good deals for consumers as cable companies expand into wireless offerings, design new types of service and pricing plans, and change their current plans to meet consumers’ wishes. Just as T-Mobile’s aggressive marketing shook up the wireless marketplace to consumers’ benefit, 5G-enhanced services will spark a wireless-versus-cable fight to be Americans’ first choice for broadband.

It’s tough to predict which communications providers will come out on top, but it’s pretty safe to say that consumers will get better deals. That’s the whole point of competition and why policymakers should aim to enhance it. Smart public policy decisions that support competition and benefit consumers begin with an understanding of whether a particular market is competitive. That’s why clear policy goals designed with economic rigor need to be a priority for our regulatory bodies, especially the FCC.