Does The Wireless 'Law of Three' Apply In U.S. Market?

As part of his "State of the Global Mobile Industry" for the first half of 2011, mobile consultant Chetan Sharma discussed wireless competition in markets worldwide. In particular, he noted a pattern in which the top three carriers in any nation control virtually all (93%) of the market.

"It doesn't matter if the market is defined by 'controlled regulation' like in China, Korea, and Japan or if it is 'open market' driven in markets such as the U.S., U.K., and India. Eventually, only [the] top 3 operators control the majority of the market," he wrote. In numbers, that boils down to the top three players accounting for 46%, 29%, and 18% respectively, of the wireless market. "To achieve some semblance of equilibrium in the market the top operator shouldn't have more than 50% of the market share and the number three player shouldn't have less than 20%. This helps create enough balance in the market to derive maximum value for the consumer," wrote Sharma in the report. Looking at that idea in light of AT&T's proposed acquisition of T-Mobile, where would that leave the U.S. cell phone market? The merged entity would have about 42% share (or about 130 million customers) and leave Sprint with about 12% share. Together, AT&T and Verizon Wireless would control nearly 80% of the U.S. market. So according to Sharma's formulation, the combined AT&T/T-Mobile wouldn't have more than half the market, but Sprint, as the No. 3 player, wouldn't meet the 20% level for ensuring a balanced market. Sprint itself could acquire Clearwire, Lightsquared or another wireless operator to increase its share and try to remain more competitive with what would be the duopoly of AT&T and Verizon. But that would only lead to further industry concentration.