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The Evolution of the US Mobile Market
- 1. The Evolution of the U.S. Mobile Phone Market
- 4. a perceived victory “Competition in the communications markets will yield lower prices and more choices for consumers, rapid technological innovation and a stronger economy.” – Reed Hundt, 1997 (former FCC Chairman)
- 7. Credits: AT&T-Mobile by JD Hancock Briefcase phone by Adam Simon Ed Whitacre by DAN_DAN2 FCC Open Meeting by wiredbike Phones Old & New by JohnConnell Verizon 4G marketing by ianfogg42 Corey Christiansen http://corey-christiansen.com mail@corey-christiansen.com
Editor's Notes
- I chose to look at the mobile phone market because I was interested in knowing why AT&T had decided to purchase T-Mobile and whether or not the merger is expected to be approved by both the Justice Department and the FCC. For this presentation I’ll began with Bell labs and the first cellular network. I’ll then talk about regulation and some of the big names of the 1990s. I’ll finish my presentation with some of the emerging possibilities in the U.S. market and the latest developments in the T-Mobile / AT&T preceding’s.
- Car phones were first used by elite consumers and businesses in 1946 but cellular concepts were just starting to emerge at Bell Labs in the late 1940s.The attraction of cellular systems was their ability to reuse channels many times in a local area, and to provide service over very large areas with low-power radios. The downside was that cost-effective cellular system required a large number of channels which had to be purchased from the FCC.In 1968 a large team was assembled at Bell Labs to prepare a “feasibility study and system plan” for the FCC and the resulting cellular plan was delivered to the FCC in 1971. In anticipation of FCC approval (and also to encourage that approval) AT&T immediately launched a full-scale development project, estimating that cellular service could be offered within about five years.Motorola decided it couldn’t let AT&T get full control of the wireless market and quickly assembled a handheld phone prior to hearings AT&T had scheduled with the FCC in 1973.It wasn’t until1980, that it became clear that the proposed system would work as promised,. The FCC demanded had agreement on a single nationwide “compatibility standard” that would allow any cell phone to operate in any system and intense controversies over the role to be played by the AT&T monopoly delayed commercial service further. until 1983.In 1984 the Justice Department’s long anti-trust case against AT&T finally ended with the breakup of the AT&T monopoly. AT&T Wireless began as McCaw Cellular and was based in Redmond. It was purchased by AT&T in 1994 to kick-start their cellular division with its 2 million subscribers.
- In 1999 an issue of Business Week featured Ed Whitacre with the headline “The Last Monopolist”. This featured article discussed how Whitacre would survive what was thought to be an age of ruthless competition. served as national president of the Boy Scouts of America from 1998 to 2000Joined AT&T in 1963. Became CEO and chairman of Southwestern Bell in the 1990 (the smallest of the baby bells created in 1984 In 1997 he bought the Pacific Telesis group (CA, NV, and midwest). In 2005 he bought AT&T and in 2006 he bought Bell South, both approved by the Bush administrationWhitacre’s testimony in 2006 before the Senate Judiciary Committee marked the first major public appearance of the resurrected AT&TWhitacre focused on maximizing returns and minimizing government oversightDespite being the head of a telecommunications company, he has no computer in his office and he refused to use email. He once told reporters “I’m not computer illiterate, but I’m close”Chairman and CEO of General Motors Top Three Priorities: “I like to be the best. I like for our stock prices to be the highest. I like for our employees to be the highest paid.”Photo: Ed Whitacre 2009
- Those paid to lobby the FCC pushed the free-market agenda to achieve the social goals of communications policy. I n 1997 FCC chairman Reed Hundt explained “competition in the communications markets will yield lower prices and more choices for consumers, rapid technological innovation and a stronger economy.” (The Master Switch, ch. 18)Wireless long-distance and then mobile technologies enabled the opening of that system to one of multi-carrier provision, with Regulation 2.0 stressing privatization, entry, liberalization, and competition. (Regulation 3.0 for Telecom 3.0, abstract)The Telecommunications Act of 1996 was founded on the principle of “competition everywhere”, meaning remove barriers to entry in all segments of the industry. The law was hailed in 1996 as a sort of victory over the Bell monopoly and the dawn of a new age. This was hopelessly naïve. (The Master Switch, ch. 18)Somehow forgotten was Bell company’s 100 year track record of annihilating or assimilating dependent competitors. Would be competitors were tied of in years of complex and expensive federal litigation, in turn killing their business. (The Master Switch, ch. 18)In 1999 a new FCC under the Bush administration gutted the sharing rules of the Telecommunications Act of 1996. With the sharing rules gone, most of the companies that hadn’t yet entered bankruptcy went under. (The Master Switch, ch. 18)
- Government controls blocks of frequency spectrum required to offer services. Innovators ability to come up with and exploit the potential of new offerings is highly dependent on the government (Christensen, Ch. 4)Cricket Wireless (owned by QualComm): I signed up in 2001 for my first phone in Spokane. One of the first services to provide unlimited local minutes at an affordable price. Created a low0end disruption by targeting overshot customers who spent the majority of their time around their home and didn’t need long distance. The government portioned off the available spectrum in key cities hampering their capacity to grow and move up-market. (Christensen, Ch. 4)The auction for the 700 MHz radio and television broadcast band (no longer in use after the mandated switch to digital television), had the potential to provide competition for the major wireless carriers. Telecommunications titans AT&T and Verizon emerged as the big winners in the electromagnetic land rush yet Google was able to achieve it's primary goal of creating a "open access" provision. (DEVELOPMENTS—TELECOMMUNICATIONS,pg 651)
- The drop in per-minute charges from more than $.50 per minute in the mid-1990s to just above $.10 today has been accompanied by two distinct, reinforcing trends: competitive entry and national network consolidation. (Is federal preemption efficient in cellular phone regulation?, pg. 221)Fiber and high-capacity wireless are raising scale economies and network effects, leading to a more concentrated market. At the same time, the rapidly growing importance of infrastructure, coupled with periodic economic instabilities, increase the importance of upgrade investments. All this leads to the return for a larger role for the state in a Regulation 3.0 which incorporates many elements of the traditional regulatory system— universal service, common carriage, cross-subsidies, structural restrictions, industrial policy, even price and profit controls. (Regulation 3.0 for Telecom 3.0, abstract)As I’ve discussed in this presentation, there have been at least two major shifts in the U.S. mobile market since its inception in the 1970s. The first was a shift from a highly regulated market to more free-market ideals. The second shift, happening now, will likely take us back to the traditional regulatory system. Some of the new regulations will likely benefit up-and-coming telecommunications business as well as consumers while limiting the ability of the incumbents to rule the market.