Mayo discusses telecom regulation on the Hill

Posted by on October 23rd, 2012, 5:41 am

On October 9th, Executive Director John Mayo addressed an audience in the Dirksen Senate office building comprised of Congressional staffers, Industry representatives and the press.  His comments come from recent economic policy vignette, “Is it Time to Unify Telecommunications Policy?” co-authored with Jeffrey Macher.

Telecommunications has transformed radically, especially in the last twenty years.  As part of the study [1] used as the basis for the economic policy vignette, Dr. Mayo and Dr. Macher took data from the Centers for Disease Control National Health Interview Survey that collected household specific data from 2003-2010, giving a picture of 35-40k households each year for a total of approximately 190,000 observations.  In addition to data about health, it contained questions about telephone portfolios that were then supplemented with data from the FCC, Department of Agriculture, Bureau of Labor Statistics, Census Bureau and the Cellular Telephone and Internet Association.  From this robust data source Dr. Mayo and Dr. Macher were able to paint a rather nuanced picture of the exploding wireless industry within telecommunications.

Today there are over 330 million cell phone subscribers in the US.  Furthermore, more than half of wire-line subscribers have already cut off their wired service in favor of wireless service, with a clear trend of more and more subscribers forgoing wired service in favor of wireless.  The data, therefore, suggests that wire-line and wireless services are seen as substitutes, and this is increasingly true not just among young and poor households, but also among older households as well.

It’s not just usage of wireless services that is exploding.  In 2011 a bit more than $335 million was invested in the wireless industry.  Looking at that level of investment more closely, Dr. Mayo showed that over the last decade, wireless investment outperformed overall private domestic investment.  Furthermore, cell site deployment grew dramatically, dropped calls decreased, and wireless versatility evolved from 1G to 3G to 4G, leading to more and more innovation while prices continually dropped.  As 85% of U.S. consumers have a choice of 5 or more wireless carriers it’s hard to argue this is a market that isn’t thriving.

Dr. Mayo then turned the discussion toward policy, arguing that telecommunications policy “must be updated to reflect modern realities of a well-functioning market.”  The convergence of wire and wireless services, coupled with the emergence of anywhere/anytime voice, data and video communications should be reflected in the policy, and furthermore it just makes sense to regulate wired and wireless services in the same way given current technology.  If current regulations are not updated, Dr. Mayo argued we will continue to focus on wired telecommunications, could result in spectrum shortages that would in turn drive prices for wireless services up, harming consumers.  The opportunity to re-regulate, however, will result in not only a modernized and unified regulatory focus, but also maximizes the likelihood of continued investment, innovations and affordable prices.

Dr. Mayo’s slides are available here.

 


[1] Demand in a Portfolio-Choice Environment: The Evolution of Telecommunications, a paper by Jeffrey T. Macher, John W. Mayo, Olga Ukhaneva, and Glenn Woroch (November 2011)

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