Competitive playground

Verizon Wireless is smart to quickly agree to sell off wireless properties in 85 markets where it overlaps with Alltel Communications L.L.C. assets in order to try to speed approval of its plan to buy the nation’s No. 5 carrier for $28 billion. Verizon Wireless could be under even more scrutiny from a new Federal Communications Commission, a new Congress and a new presidential administration, all of which are set to come in 2009.
Indeed, AT&T Mobility and VZW are under increased scrutiny at the state and federal level – and from their rural counterparts – as they continue to dominate the U.S. wireless landscape. Success has its price, it seems. The Rural Telecommunications Group, an association of smaller carriers, has petitioned the FCC to bring back the spectrum cap; thus not allowing any carrier to own more than 110 megahertz of spectrum below 2.3 GHz.
But even if the nation’s largest carriers agreed to a spectrum cap of 110 megahertz, what would such a mandate bring? More competition? From whom?
Take a closer look at the overlapping properties VZW said it would sell in order to buy Alltel: for the most part, they’re rural assets. Potential buyers include Leap Wireless and MetroPCS, the No. 7 and No. 8 largest U.S. wireless carriers – not the mythical new entrant public-interest groups were hoping to see in the 700 MHz auction. I would even argue that a combined Verizon Wireless/Alltel puts more pressure on Leap and MetroPCS to find common ground and proceed with plans to merge with each other. While a combined Leap-MetroPCS potentially could better compete against larger carriers, a combined company would count fewer than 10 million subscribers. This would still be about 3 million less than Alltel had on its own.
One could also argue that fewer stronger players could bring more competition to the marketplace; thus the reason some people like the idea of T-Mobile USA buying Sprint Nextel.
I’m not sure how I feel about reinstating a spectrum cap, but I do know this: in the past, innovation – an all-digital network, a camera phone, a one-rate plan – that’s what fueled competition between wireless carriers. Likewise, missteps – failed savings from a merger, network quality problems – brought once-shining operators to their knees quickly.