Comment from the desk of Jennifer Koester, an insider at Lease Advisors.
In the telecommunication industry, competition is key. The more wireless carriers there are, the happier consumers are. This is because having multiple companies fighting over your business often leads to better deals, contracts and devices. However, recently smaller wireless companies are going out of business due to the market control held by the more popular Verizon Wireless and AT&T. Cincinnati Bell, the nation’s ninth largest carrier, announced that it will be closing its doors due to its inability to compete in today’s wireless industry. The FCC’s spectrum auctions strive to create equal opportunities for smaller carriers, such as Cincinnati Bell, to acquire spectrum. With the small company going out of business, are the spectrum auctions truly fair? It is no secret that many wireless companies have been experiencing some troubles lately. Cincinnati Bell made clear last year that they were reviewing strategic alternatives for its wireless business, just another way of saying they are looking to be bought out. Throughout the fiscal year, Cincinnati Bell’s wireless subscriber base decreased from 385,000 in the first quarter to 340,000 in the fourth quarter. It’s also worth noting that the company has been unsuccessful in finding a buyer for its customers and network.
Unfortunately, Cincinnati Bell is not alone. Revol Wireless in Ohio and Indiana sold off spectrum licenses and shut down its network. Revol has also not found a buyer. We believe these two companies struggled because of the control larger companies have over the spectrum auctions. A report by The Center for Public Integrity found that telecom giants AT&T and Verizon were partnering up to spend close to $30 million on lobbying last year, practically four times the amount spent by Sprint and T-Mobile. The auction in question was for low-frequency 600MHz, which is highly valued for its ability to penetrate buildings and decrease the demand for new cell towers. AT&T and Verizon already control 74 percent of existing low-band frequencies, putting Sprint and T-Mobile at a significant disadvantage. If the third and fourth largest wireless companies are being affected by the top two’s clout in the auctions, it is no wonder why smaller companies such as Cincinnati Bell and Revol Wireless are going out of business.
Check out tomorrow’s issue for Milana Meshenberg’s solution!
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