Wireless competition, prices fall: report

WASHINGTON (Reuters) - Wireless phone customers have enjoyed lower prices and better coverage despite reduced competition from years of consolidation in the $150 billion industry, a U.S. report said on Thursday.

The Government Accountability Office, the audit arm of the U.S. Congress, said consolidation has led to domination of the sector by AT&T Inc, Verizon Wireless, Sprint Nextel Corp and T-Mobile USA Inc.

“Industry consolidation has made it more difficult for small and regional carriers to be competitive,” the GAO said in a wireless competition report.

However, consolidation may have helped the biggest carriers become more efficient, allowing them to offer more services for similar or lower prices while improving coverage, it said.

The findings come as the Federal Communications Commission considers ways to spur competition in the wireless industry.

Under recommendations made in the FCC’s National Broadband Plan in March, the agency is considering ways to provide more airwaves to wireless companies to meet a growing demand for mobile devices. It is trying to determine if a lack of competition plays a role in meeting the demand.

Citing Consumer Price Index data for average prices of goods and services, the overall average price for wireless services declined each year from 1999 to 2008, the GAO said.

Average prices in 2009 were half the prices in 1999, it said.

“This illustrates that consumers are generally getting more wireless services (such as more voice minutes of use) for lower costs than they were 10 years ago,” the GAO said.

The report’s conclusions on pricing are good news for the wireless industry, which has been under siege from lawmakers, regulators and consumer groups complaining about the lack of competition.

At the same time, the GAO’s findings on competition bolster a May report by the FCC that for the first time since 2002 did not describe the wireless industry as having “effective competition.”

The mixed results create uncertainty about whether regulators will have the support to impose new policies and regulations to increase competition for consumers who are demanding more data plans on their mobile handsets to surf the Internet and watch videos.

According to the GAO, the number of wireless subscribers exploded to 285 million at the end of 2009 from just 3.5 million a decade ago. Nearly 40 percent of U.S. households now rely primarily on wireless devices for phone calls, it added.

The GAO report also could help shape the terms of the next set of major auctions of airwaves for an industry largely dominated by AT&T and Verizon Wireless, a venture between Verizon Communications Inc and Vodafone Group Plc.

Sprint and T-Mobile USA, a unit of Deutsche Telekom AG, are seeking more airwaves to better compete against AT&T and Verizon Wireless.

More spectrum could potentially be available to wireless companies if the FCC can wrest some from broadcasters and the Commerce Department can persuade U.S. government agencies to part with some that are not being used or are being used inefficiently.

Reporting by John Poirier; editing by John Wallace