Competitive wireless carriers take on AT&T and Verizon

Competitive carriers both large and small, urban and rural are banding together to take on the nation's two largest carriers, AT&T and Verizon Wireless, as they amass more control over the wireless market.

On Monday, the Rural Cellular Association will announce that it is rebranding its organization and calling itself the Competitive Carrier Association. Steven Berry, CEO of the Washington, D.C., lobbying group, said the change is a reflection of how the wireless industry has evolved over the past few years.

Owing to increasing consolidation in the market, small rural carriers, which were RCA's original members, now have much in common with carriers serving urban areas, such as MetroPCS, as well as the larger nationwide carriers, like Sprint Nextel and T-Mobile USA.

"AT&T and Verizon Wireless have gotten so big so fast," said Berry in a phone interview. "The newly branded organization reflects the policy issues that have developed as the market has turned into a duopoly. Whether they are rural carriers or bigger nationwide carriers, they all share some of the same policy concerns around spectrum allocation, data roaming, and device interoperability."

Indeed, over the last decade, AT&T and Verizon Wireless have managed to gobble up nearly every tier two carrier that had been operating. The result has been a market in which two players control the majority of wireless spectrum as well as mobile subscribers throughout the nation.

Today AT&T and Verizon Wireless combined control more than 70 percent of the wireless market. Their closest competitors, Sprint Nextel and T-Mobile USA don't even come close in terms of the number of subscribers. At the end of the second quarter of 2012, Verizon reported it had a total of 111.3 million wireless customers. AT&T said it had 105.2 million wireless subscribers. Sprint and T-Mobile reported 56 million and 33.2 million subscribers respectively. Smaller providers, such as Clearwire, MetroPCS, Leap Wireless, and U.S. Cellular have even fewer subscribers.

AT&T and Verizon are so far ahead in terms of wireless subscribers that even if you combined subscribers from Sprint, T-Mobile, and every other competitive carrier in the market, it would still barely amount to the same number of subscribers served by either AT&T or Verizon Wireless.

The need for a single organization to lobby for the needs of competitive carriers became apparent when in March 2011 AT&T proposed its $39 billion bid to buy T-Mobile USA. The merger would have combined the nation's No.2 wireless operator with the country's No. 4 carrier.

Sprint Nextel opposed the merger, as did other smaller players, such as MetroPCS and Leap Wireless. The RCA also opposed the merger. But Berry said it was that merger that spurred carriers throughout the industry to talk about an alliance that would help them get their voices heard on the policy front.

"AT&T's attempt to buy T-Mobile woke up Sprint and other competitive carriers that had not been members of RCA," Berry said. "They recognized that unless they took aggressive action, they were not going to be able to survive."

Sprint joined the RCA shortly after the AT&T merger with T-Mobile was announced. And soon after the deal fell apart, T-Mobile joined the group as well.

While RCA got its start two decades ago representing the interests of small rural and regional players, Berry said it became clear after the AT&T and T-Mobile merger attempt that competitive carriers of all sizes, regardless of whether they served rural or urban areas, had similar interests.

Primarily, these carriers are concerned with the control that AT&T and Verizon Wireless already have over wireless spectrum, the lifeblood of the industry. They're also concerned about roaming arrangements and device interoperability.

In the early days of the wireless industry, when all wireless carriers were regional, operators needed roaming agreements to provide service to customers who traveled out of their license areas. Devices also needed to be interoperable in order to allow for this roaming and to ensure that component makers could keep costs low when building new phones.

But as AT&T and Verizon Wireless have grown their networks, amassing additional wireless spectrum as well as more subscribers, they do not need roaming arrangements. And because they serve so many wireless subscribers they can practically control the entire device ecosystem alone.

"What do you do when the two largest carriers don't need strategic partnerships?" Berry asked. "They can control the roaming relationships and define the specifications for devices. They're able to create their own wireless band plans that drive a unique path to 4G LTE and exclude those that serve competitive carriers."

Berry said the newly branded CCA is meant to give a voice to all competitive carrier issues and not just those affecting rural carriers. And it will also help these companies forge competitive and cooperative relationships that will let them tap into an ecosystem that will help give them power to control the supply chain for devices and technology.

Berry said these companies may still operate regionally, but he said they're all providing a nationwide service to their customers. And in order to provide that type of service and compete with the two largest competitors, they must come together.

"It's really a matter of survival for these companies," he said. "Whether they are a small carrier or a carrier like Sprint selling a national product, they are still competing with AT&T and Verizon Wireless. And what they all have in common is the need to promote and support common policies that reflect their needs as competitive carriers."