FCC Says Mobile Industry Concentration Rises; AT&T Sees More Regulation

The Federal Communications Commission said concentration is rising among U.S. mobile-telephone providers, a conclusion that AT&T Inc., the nation’s second- biggest wireless company, said may lead to more regulation.

The agency, in adopting an annual report today, didn’t conclude that the industry was competitive, the first time it omitted such a finding since 2002.

“The FCC’s decision is a dramatic break from years of solid precedent,” Robert Quinn, AT&T senior vice president of federal regulatory, said in an e-mailed statement. “This seems intended to justify more regulation in a market where it is clear beyond doubt that regulation is simply unwarranted.”

The FCC under Chairman Julius Genachowski, a Democrat, is increasing scrutiny of wireless carriers for actions such as exclusive contracts with handset makers and fees that may thwart competition. The report sparked debate among commissioners before they approved the conclusions 5-0, with the two agency Republicans voting to “concur” to show their displeasure.

“I see nothing in this report that should lead us to question the overall competitiveness,” Republican Commissioner Meredith Attwell Baker said at the meeting. The agency “should have made an affirmative finding of a competitive market.”

Commissioner Michael Copps, a Democrat, said the report shows “competition has been dramatically eroded and is seriously endangered by continuing consolidation.”

Genachowski said the report doesn’t seek a “yes” or “no” conclusion about competition and aims to supply data that can be used by policy makers.

‘Very Concerned’

“We are very concerned,” said Steve Largent, president of the CTIA-the Wireless Association, the Washington-based trade group whose members include AT&T and Verizon Wireless, owned by Verizon Communications Inc. and Vodafone Group PLC.

“Any attempt to add regulation to wireless as a result of this report would be both misguided and harmful to consumers,” Largent said in an e-mailed statement.

Competition has lowered prices, Verizon said in a statement following the agency’s vote.

The FCC report recognizes competition among the two largest carriers, while the industry is “moving toward a duopoly,” Steven Berry, president of the Washington-based Rural Cellular Association that represents small carriers, said in an interview before today’s FCC meeting

“AT&T-Verizon competition may be good for the majority of consumers right now in the dense markets,” Berry said. “There’s a trend coming about here that’s going to potentially eliminate competition, first in the small, rural markets and later in the more densely populated markets.”

CTIA said in a blog posting that “the U.S. wireless industry is the most innovative and competitive.” Wireless investment in 2009 exceeded the combined levels in the five largest European countries, the CTIA said.

In July 2002, the FCC’s mobile telephone report said the industry had “increasing competition.” Subsequent reports released through Jan. 16, 2009 had found “effective competition.”

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

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