- The Washington Times - Sunday, September 2, 2007


Typically when consumers buy more of something and pay less, the response is high-fives all around. But for the U.S. wireless phone market, calls for European-style regulations are growing. The clamor has been fed largely by a belief that Europeans are getting a better deal for cellphone service than Americans. But, according to recent study by the American Consumer Institute, a close look at the facts from the Organization for Economic Co-operation and Development (OECD) and Federal Communications Commission (FCC) says that isn’t so.

Critics of the U.S. wireless model say the domestic market is concentrated among too few companies and that new government regulation is needed to ensure consumers get a fair deal. Intuitively, the assertion seems at odds with the high-powered ad campaigns of U.S. cellphone competitors, who woo customers with offers of larger and faster networks, higher service quality, and new mobile entertainment and information offerings.

Indeed, the data confirm that the American wireless market is more competitive and vibrant than markets overseas. Americans have more competitors to choose from, lower prices and a much larger selection of mobile devices than their counterparts in Europe — and most of the rest of the world.

For example, American wireless consumers pay less per minute of service than consumers in any European country. The most recent FCC data shows an average cost of about 7 cents per minute for Americans compared to about 22 cents per minute for Europeans, second lowest in the world to Hong Kong. And, if their behavior is any guide, consumers know a bargain when they see one. As costs have declined, usage has gone up. Telecom analysts for Merrill Lynch estimate American wireless callers used 834 minutes a month at the beginning of 2007, the most of any country in the world. The average European, by comparison, used only 153 minutes.

The U.S. is also served by the most cellphone carriers in the world and, according to OECD data, the top domestic carrier has a lower market share than in any other country. Indeed, with four nationwide carriers, several regional wireless providers, and more than 100 smaller niche or local carriers, Americans enjoy a wide range of choices in the marketplace. Virtually every American has access to three or more wireless competitors and 94 percent had access to four or more wireless competitors as of 2005.

Still, some critics of the U.S. market argue that, whatever the dollars and cents, Europe leads in innovation. While that claim is harder to resolve by examining data, greater competition is proven to spur more and better product and service choices in the marketplace, certainly not less.

For instance, the industry estimates American consumers have access to more than 700 different devices by more than 10 manufacturers — the most of any country. While some consumers might find this a dizzying array of options, it also suggests competition and innovation are alive and thriving in the U.S. What’s more, Americans usually can get the latest devices at deep discounts.

No doubt, both the American and European wireless markets have their strengths and weaknesses. But, on balance, American cellphone users clearly are benefiting from strong competition delivering more service for less money. The last thing the wireless market needs is a European-style market that produces higher prices and lower usage.

Stephen Pociask is president of the American Consumer Institute.

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