US Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights Hearing on “Game of Phones: Examining the Competitive Impact of the T-Mobile-Sprint Transaction”, June 27, 2018
Looking at the merger between T-Mobile and Sprint, there are two important questions: How will this merger affect prices, and how will it affect investment in infrastructure? In practice, American consumers and businesses will still be able to access some of the world’s best mobile infrastructure at competitive prices, and that infrastructure will increasingly be more accessible to Americans in all areas.
In less than a generation, the global mobile wireless industry has succeeded to connect nearly every person on the face of the earth to a mobile phone and a mobile network. It is the mobile phone, not the internet, which is the world’s most quickly adopted innovation. Mobile networks have been leveraged to connect people to the internet, and today about half of the world’s population connects to the internet with a mobile phone. During this period, mobile subscription prices have fallen more than 90 percent, while data volumes have increased thousands of times. Market liberalization and subsequent consolidation have driven this trend. Markets have been liberated from government control and subsequently consolidated through the innovative and creative ways that mobile operators combine complementary assets. We have never had more data, more products, and better prices than today. Looking at 2012–17, the figures from Bank of America Merrill Lynch show that averaged revenue per user (ARPU) in the US has declined from $54 to $45 (Verizon) and from $43 to $34 (T-Mobile). In five years, American consumers have cut 20 percent of the cost of their mobile bill while the quality, volume, and speed of the service has increased dramatically. Despite the massive consolidation in the US and worldwide telecom market over the years, consumers prices have only gone one way: down. There are few products and services that improve in quality as they decrease in price, and consumers consistently get value for money. Their outlay for connectivity, of which mobile wireless is a vital part, takes us an increasingly smaller share of their total income. People spend more as a percentage each on housing, transportation, education, clothing, food, and vacation—in many cases seeing prices increase—whereas the price of mobile wireless has fallen.
Moreover, competition in the mobile market is global. The Europeans adopted the Global System for Mobile communications (GSM) standard to give their phone manufacturers an edge. Verizon realized that their (code-division multiple access (CDMA) technology was not compatible with the cool smartphones on the GSM/WCDMA market. It would not have mattered if there were 100 CDMA mobile operators. People wanted the technology of the cool smartphones. Verizon did not copy the Europeans and launch 3G (WCDMA). Instead, they leapfrogged to 4G. The other US operators followed. It was not the number of players that triggered that race, but rather the technological development. Today, America’s 4G economy supports five million jobs and adds $475 billion annually to GDP.5 The rollout of a 5G network should add 3 million new jobs and contribute $1.2 trillion to the US economy.