Cooper, M.Overcharged and underserved: How a tight oligopoly on steroids undermines competition and harms consumers in digital communication markets

Recommended reading

Mark Cooper

Release date:
December 2016

Consumer Federation of America (CFA)

This paper examines the US market structure and performance of the four major products that constitute the digital communications sector – wireless, broadband Internet access service (BIAS), multichannel video programming service (MVPD) and business data services (BDS). The first three are sold directly to consumers, the fourth is an intermediate good, vital to the delivery of the other three digital communications services, but also a key input to all goods and services sold by non-communications firms to the public. Taken together these four services constitute a huge market equal to about half a trillion dollars today, or almost three percent of the gross national product.

The rapid spread and dramatic growth of these service is testimony to their immense value to consumers; they would not have become a major household expenditure (rivaling other necessities like electricity, gasoline, health care and groceries) without delivering services that consumers want and need. Unfortunately, that silver cloud has a dark lining.

Four firms (ATT, Verizon, Comcast and Charter) dominate these four markets, forming what this paper shows is a “tight oligopoly on steroids.” Not only is each market highly concentrated, with these four firms accounting for over 70 percent of the sale in each, but, to a remarkable extent, they have avoided head-to-head competition over the 20 years since the passage of the Telecommunications act of 1996. 

Link to publication