WASHINGTON, D.C. – May 7, 2009 — Chris Murray, senior counsel for Consumers Union, the publisher of Consumer Reports, will call on lawmakers to encourage competition in the wireless industry at a hearing today to be held by the House Energy and Commerce Subcommittee on Communications, Technology and the Internet.
Murray will testify on behalf of Consumers Union, Consumer Federation of America, Free Press and Public Knowledge. The formal testimony is available online at: http://www.consumersunion.org/pdf/wireless-testimony-509.pdf
The groups say policymakers can boost competition among wireless carriers by making it easier for consumers to switch carriers, by helping ensure that smaller carriers can compete in a marketplace dominated by Verizon and AT&T, and by closely scrutinizing industry practices such as handset exclusivity, application blocking, and early termination fees.
“The wireless industry is headed toward a duopoly where two companies control the vast share of revenues,” Murray said. “As this consolidation trend continues, we expect price hikes to continue. Wireless pricing is one of the biggest sources of complaints among Consumer Reports readers. Americans pay more for wireless services than people in most any other developed nation. The industry tries to obscure this fact by focusing on the price of wireless minutes. But when you look at the total cost of wireless service, including monthly fees, we pay more than consumers in almost any other country in the world today. When you consider that telephone monopolies, the companies that the wireless industry was supposed to compete against, have now purchased and merged their way to become the two dominant wireless companies, some serious oversight is warranted.”
Gigi B. Sohn, president and co-founder of Public Knowledge, said, “This Subcommittee should take careful note of the anticompetitive conditions described in the testimony. When the wireless companies can block customers from using applications such as Skype, or decide on their own which organizations receive short codes and which don’t, then we have a situation in which Congress and antitrust enforcement authorities must act to restore consumer rights and competition to an increasingly concentrated market.”
Chris Riley, policy counsel of Free Press, said, “Saying the wireless market is more competitive than the wired is like saying that a horse and buggy is faster than a bicycle. Deregulation has failed to produce enough competition to prevent consumer harms – it’s time to investigate other solutions.”
In the testimony, Murray points to price hikes for text messaging services as a prime example of how the market power of the dominant wireless companies is affecting consumers. “According to industry analysis, the average revenue per texting subscriber has risen 150 percent in the last four years,” Murray said. “Why are the dominant wireless carriers raising prices on a service that, according to the experts, costs them almost nothing to run? Because doing so is profitable, and because they can.”
Murray said the wireless industry meets the definition of a highly concentrated industry according to Justice Department guidelines for mergers. “When there is a highly concentrated industry that raises prices for consumer services that have declining costs, and that industry is reporting huge revenues in the middle of an economic recession, it should raise more than a few eyebrows among policymakers,” he said.
“Wireless Internet services will increasingly become the way that consumers connect to the Internet. If we allow anti-consumer, anti-innovation practices to continue, we should expect our international broadband rankings to continue to slide, innovation to be less robust, and our mobile phone markets to continue to lag behind Europe and Asia.
“Free markets and competition can help solve many of these problems, but only when consumers are armed with reliable information about the services they buy, and when they do not encounter undue obstacles to voting with their pocketbooks and switching services. Right now, this market is not free, and it is not fair. We ask policymakers to reject the anti-competitive behavior of companies who control consumers’ on-ramps to the Internet, and to engage in earnest oversight so that innovation can blossom and our Internet economy can help boost our economic recovery,” Murray said.
David Butler, Consumers Union, 202-462-6262