FCC finds 'effective competition' in U.S. wireless market

WASHINGTON (Reuters) - A divided Federal Communications Commission on Tuesday approved a report that found for the first time since 2009 there is “effective competition” in the wireless market, a finding that could help Sprint Corp and T-Mobile US Inc to merge.

Specialist traders work at the post where Sprint is traded on the floor of the New York Stock Exchange (NYSE) in New York, U.S., September 22, 2017. REUTERS/Brendan McDermid

Reuters reported last week that the wireless carriers are close to agreeing on tentative terms on a deal to merge, a major breakthrough in efforts to merge the third and fourth largest U.S. wireless carriers.

The transaction would significantly consolidate the U.S. telecommunications market and represent the first transformative U.S. merger with significant antitrust risk since President Donald Trump’s inauguration.

FCC Chairman Ajit Pai said “most reasonable people see a fiercely competitive marketplace” citing intense price competition carriers. “This is strong, incontrovertible evidence,” he added.

The FCC approved the report by a 3-2 vote.

A decade ago there were seven major U.S. wireless carriers and today the largest four carriers led by Verizon Communications Inc and AT&T Inc control 98.8 percent of the U.S. market, according to the FCC.

The FCC would need to approve any merger as would the Justice Department. In 2014, the FCC and Justice Department told the carriers they would not back a merger and the companies abandoned merger talks.

FCC Commissioner Jessica Rosenworcel referenced the potential looming merger.

“While this report celebrates the presence of four nationwide wireless providers, let’s be mindful that a transaction may soon be announced that seeks to combine two of these four,” Rosenworcel said.

“For my part, any transaction before us will require someone to explain how consumers will benefit, how prices will not rise, and how innovation will not dissipate in the face of so much more industry concentration.”

She added: “Someone will also need to explain how having fewer potential big bidders in upcoming spectrum auctions will not render our most potent distribution mechanism substantially less powerful.”

FCC Commissioner Mignon Clyburn said the competition report “takes a decidedly myopic view of the ecosystem, and instead focuses only on ‘competition in the provision of mobile wireless services.’ This is like a doctor looking at one organ and pronouncing a patient fit as a fiddle.”

FCC Republican Commissioner Mike O’Rielly praised the report and noted intense wireless competition has led to price cuts, despite carriers investing $200 billion in networks over the last six years.

AT&T said in a statement the report shows “with an array of providers, pricing plans and service offerings to choose from, there’s no question that consumers are reaping the benefits of a competitive industry.”

Reporting by David Shepardson; Editing by Marguerita Choy