The FCC has released a wealth of data and analysis on the state of the wireless industry in the United States.
The industry continues to grow apace with penetration hitting 86%. Consolidation has had limited effect on local competition levels, although this will likely develop in 2008 as several deals have been finalised.
The latest data from the carriers shows that growth has slowed while significant changes to the market. such as consolidation and the roll-out of unlimited use tariffs, will have further shaken up the industry in 2008.
The U.S. regulator, the FCC, has released the 13th Annual Competition Report on the wireless industry, providing both an overview and details of the nature of the industry in the United States, including spectrum use, standards, coverage, quality and competition levels, capital expenditures, pricing, subscribership, use, services, convergence and intermodal substation effects.
Coverage and Subscribership
Some 99.6% of the U.S. population lives in a census block, of which there are just over 8.26 million (containing 285 million people, although this is based on the year 2000 census), with at least one wireless provider. One or more providers cover 74.5% of the total land mass of the United States when federal lands are included—or 84% when these lands are excluded from the calculations. Some 95.5% of the population and 40.8% of the land mass is covered by three or more providers. Broadband networks (CDMA EV-DO and UMTS/HSPA) were available in at least part of the census blocks that were home to 92% of the population—EV-DO networks covered 92.2% of the population while the WCDMA/ HSPA network deployment (by AT&T) covered only 53.8%.
Total subscribers numbered 263 million at the end of 2007, up 21.2 million or 8.8% year-on-year (y/y) and taking penetration to around 86.1% of the total U.S. population of 305.6 million at the end of 2007. The top eight facilities-based carriers accounted for 92.8% of the market. The resale sector, which included 40 MVNOs, accounted for 18.4 million or 7% of subscribers, although these are included in the figures below under their home carrier.
Competition Levels
The Herfindahl-Hirschman Index rating of 2,674—flat with the year earlier—indicates a highly concentrated industry when the country is divided into smaller economic area subdivisions. Between 1,000 and 1,800 is moderately concentrated; above 1,800 is considered concentrated. Concentration measures range from 1,795 up to 6,272 in different economic areas, but the differentials have been moving towards the median over the last few years. An international comparison is made showing the United States to be relatively competitive compared to most Western European and Asia-Pacific markets, with only the United Kingdom having a greater number of competitors ('5' compared with '4+') and a lower market share for the top two carriers. A large number of mergers have occurred in the intervening period, which, despite regulatory moves to ensure competition within local market areas, will reduce the overall level of competition. With the removal of spectrum caps, the main carriers have dominated spectrum auctions, helping to lock out new entrants, although there are set to be some, with one analysis of the 700-MHz auction showing that most areas included licences won by small, rural or new entrant bidders.
Use of Services
Minutes of use rose to 769 minutes per month, up by 7.7% on the previous year, compared to 161 minutes in Western Europe and 138 minutes in Japan, although it is not clear if this is based on billable minutes, with U.S. operators charging for incoming and outgoing calls. SMS volumes ballooned from 18.71 billion in December 2006 to 48.10 billion in December 2007—an average of 182.9 per subscriber. MMS messages more than doubled from 2.7 billion over the whole of 2006 to 6.1 billion in 2007. In January 2008, 13% of subscribers used internet/mobile web services on their mobile phone, rising to 58% of smartphone users and 85% of iPhone users, with smartphone users averaging 4.5 hours per month. There was a rise in pre-paid users from 15% to 17% at the end of 2007.
Revenues
Revenue per voice minute fell from US$0.07 to US$0.06 in December 2007, although that analysis included data service revenues; excluding this, voice revenues per minute fell from US$0.06 to US$0.05 per minute. The roll-out of low-cost operators and unlimited use tariffs will have shaken up the industry in 2008 and may further depress per-minute prices.
Mobile Satellite Services
The mobile satellite service industry—GlobalStar, Inmarsat, Iridium and MSV—saw strong growth at 23% y/y to 1.1 million subscribers. ICO Global Communications and TerreStar Networks Inc. are also noted to be in the process of developing networks using satellites with ground-based components to improve capacity and coverage, while facilitating lower-cost services using mass-market handsets, thus bringing services more in line with terrestrial service providers.
The report provides a detailed look at the wireless industry in the United States using a variety of source materials. However, for more up-to-date information, the IHS Global Insight report looks at the industry up to the second quarter of 2008, while later market comparisons of the main players' performances are also available showing a major slowdown in growth.
