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Before the Federal Communications Commission Washington, DC 20554

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Before the Federal Communications Commission Washington, DC 20554 Before the Federal Communications Commission Washington, DC 20554 In the Matter of ) ) Implementation of Section 6002(b) of the ) WT Docket No. 09-66 Omnibus Budget Reconciliation Act of 1993 ) ) Annual Report and Analysis of Competitive ) Market Conditions With Respect to Mobile ) Wireless Including Commercial Mobile ) Services ) To: The Commission COMMENTS OF VERIZON WIRELESS Bryan N. Tramont Steven E. Zipperstein Adam D. Krinsky Vice President, Legal & External Affairs & Russell P. Hanser General Counsel John T. Scott, III WILKINSON BARKER KNAUER, LLP Vice President & Deputy General Counsel 2300 N Street N.W., Suite 700 Charla Rath Washington, D.C. 20037 Executive Director – Spectrum Policy (202) 783-4141 VERIZON WIRELESS Counsel to Verizon Wireless 1300 I Street N.W. Suite 400 West Washington, D.C. 20005 (202) 589-3760 September 30, 2009 TABLE OF CONTENTS SUMMARY ............................................................................................................................... v INTRODUCTION...................................................................................................................... 1 DISCUSSION ............................................................................................................................ 3 I. THE MOBILE WIRELESS MARKET: DYNAMISM, DIVERSITY, AND DIFFERENTIATION ..................................................................................................... 3 II. THE COMMISSION SHOULD MAINTAIN ITS EXISTING FRAMEWORK FOR EVALUATING COMPETITION........................................................................... 7 A. The Current Analytical Framework Most Accurately Portrays the State of Competition......................................................................................................... 9 B. Proposed Alternative Frameworks are Contrary to the Public Interest................ 12 III. THE MARKET FOR MOBILE WIRELESS SERVICES IS ROBUSTLY COMPETITIVE............................................................................................................ 17 A. The Structure of the Mobile Wireless Market Demonstrates That the Market is Competitive ....................................................................................... 19 1. There Are Numerous Diverse Providers................................................. 19 2. The U.S. Is Among the Least Concentrated Markets Internationally....... 42 3. New Providers Enter the Market with Relative Ease .............................. 47 4. Barriers to Customer Switching are Low................................................ 60 B. Mobile Wireless Providers Compete Fiercely on Price and Numerous Other Factors..................................................................................................... 64 1. Price Competition .................................................................................. 65 2. Non-Price Competition .......................................................................... 79 a. Network Investment and Technological Innovation .................... 80 b. Wireless Mobile Devices............................................................ 85 c. Applications, Content, and Openness.......................................... 85 d. Customer Care............................................................................ 86 e. Other Customer Options............................................................. 88 f. Advertising................................................................................. 90 C. The Competitive Marketplace Has Led to Rising Consumer Satisfaction........... 91 ii 1. Satisfied Customers ............................................................................... 91 2. Minimal Complaints .............................................................................. 93 IV. THE INPUT AND DOWNSTREAM MARKET SEGMENTS ILLUSTRATE A COMPETITIVE LANDSCAPE .................................................................................... 94 A. Competition in the Backhaul, Infrastructure, and Spectrum Segments Confirms that the Mobile Wireless Market is Competitive................................. 95 1. Backhaul................................................................................................ 95 2. Infrastructure ....................................................................................... 100 3. Spectrum ............................................................................................. 105 B. The Mobile Wireless Ecosystem Offers Diversity in the Device, Application, and Content Segments ................................................................. 106 1. Devices................................................................................................ 107 a. Number of Devices Available................................................... 107 b. Number of Device Manufacturers............................................. 107 c. Variety of Devices Available.................................................... 110 d. Number of Distribution Outlets ................................................ 117 e. Pricing...................................................................................... 118 f. Diverse Business Models.......................................................... 120 g. Exclusivity ............................................................................... 122 2. Applications......................................................................................... 125 3. Content ................................................................................................ 133 V. THE COMMISSION SHOULD MAINTAIN ITS MARKET-BASED PARADIGM FOR WIRELESS SERVICES BECAUSE IT BEST ENABLES INNOVATION AND COMPETITION....................................................................... 137 A. Congress Has Mandated a Market-Based Approach to Wireless and the Internet............................................................................................................ 138 B. The Commission Has Followed This Market-Based Paradigm and Has Consistently Found That It Promotes Competition and Innovation................... 141 C. New Regulation and Regulatory Uncertainty Risk Stifling Competition, Innovation and Investment............................................................................... 146 D. The APA Limits the FCC’s Ability to Change Past Policy and Regulate in These Competitive and Innovative Areas......................................................... 155 iii VI. THE COMMISSION SHOULD TAKE STEPS TO ENHANCE COMPETITION AND INNOVATION BY REMOVING BARRIERS TO INVESTMENT, NEW SERVICES, AND NETWORK GROWTH................................................................. 159 CONCLUSION ...................................................................................................................... 161 iv SUMMARY As the Commission embarks upon a new assessment of the mobile wireless services market, it has expressed a welcome preference for facts and data over rhetoric. The lodestar of its analysis must be the American consumer – and the facts and data show that the wireless ecosystem is delivering unprecedented benefits and choices to American consumers at an ever- accelerating pace. Wireless competition has accelerated during the past few years, fueled by massive innovation and investment in networks, devices, and applications which have not slowed despite the most adverse economic climate in decades. Most recently, remarkable technological innovations have come to market as carriers have gained additional scale and scope. As these comments verify, the oft-repeated, yet unsupported, claim that wireless competition is somehow “dwindling” fails to comport with the consumer experience. As discussed in Part I of these comments, the American people enjoy a multidimensional array of competing choices regarding providers, prices, service plans, devices, coverage, reliability, customer service, applications, and content. These choices are getting better, and less expensive, as carriers compete ferociously to win and retain customers. Part II explains why, in considering whether the mobile wireless market is “effectively competitive,” the Commission should retain the “structure-conduct-performance” framework used in prior CMRS Competition Reports. This highly rigorous approach is fully grounded in well-accepted principles of economic analysis, and it best enables the Commission to consider all aspects of the marketplace. New developments in the mobile wireless space may warrant the consideration of data not previously addressed, but that data can and should be evaluated within the contours of the existing framework. The Commission should reject claims urging reliance on simplistic litmus tests based on market concentration, pricing above marginal cost, or accounting v profits, as well as efforts to disaggregate the mobile wireless market by analyzing voice and data services separately. Part III of these comments demonstrates the vibrant competition across the wireless ecosystem. Application of the “structure-conduct-performance” framework reveals that the market is shaped by many players occupying different market niches, vying to win and retain customers by reducing prices, innovating, and improving quality of service and the consumer experience. The market is defined by a wealth of diverse providers, including the four “nationwide” providers (plus the emerging Clearwire) and a combination of large regional players, a host of smaller terrestrial carriers, a growing
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