July 30, 2013
Sometimes I can be a little spoiled: Yesterday’s luxuries turn into necessities that I can’t possibly live without. The cool new gadget that once amazed me becomes ho-hum, just another tool I take for granted. I expect the smartphone in my pocket to work anytime, anywhere and, upon the next upgrade, to be better and faster. But for smartphone users across the country, here’s a warning: The future of the mobile device we love so much depends on policymakers in Washington and what they decide about spectrum. It’s essential that they get it right.
Spectrum, the radio frequencies that enable wireless devices to talk to one another, is in short supply—a spectrum crunch is upon us. The Federal Communications Commission now confronts some tough decisions regarding how best to free up more of this resource so our mobile phones and tablets continue to work the way we expect.
Congress sets national spectrum policy. Last year it gave the FCC the task of drafting rules to auction off underused broadcast TV spectrum—“600 MHz spectrum”—so that wireless carriers can continue to provide fast and accessible mobile broadband service. At the same time, in its effort to further wireless competition, the FCC is reviewing its existing “spectrum screen,” the tool used to flag whether a service provider controls too much spectrum in any individual market.
Congress was clear on how the agency should approach these very different tasks. In the 2012 Congressional Spectrum Act, Congress directed the FCC to allow all financially qualified bidders to compete in the 600 MHz auction to maximize auction proceeds and to ensure that the carriers can buy the spectrum they need to meet customer demand. On spectrum concentration, Congress affirmed the FCC’s ability to change its spectrum screen through its formal rulemaking authority that includes notice and public input.
Yet, the Department of Justice now appears to advocate that the FCC should ignore Congress’ clear direction and instead approach these two separate activities through a single proceeding and in ways that would make the auction of 600 MHz spectrum more complicated and less effective.
DOJ is urging the FCC to restrict the two largest carriers, Verizon (VZ) and AT&T (T), from participating in the auction. DOJ seeks to accomplish the restrictions by having the FCC adopt an ad-hoc spectrum screen in a proceeding whose main purpose is to set the organizational structure of the 600 MHz spectrum auction.
Limiting the amount of spectrum these carriers can acquire would potentially rig the auction results, prevent some carriers from getting the spectrum necessary to give customers the service quality they demand, and forestall future wireless innovation. It’s also at odds with Congress’ clear preference for a competitive, level playing field among qualified bidders.
With fewer qualified participants, the auction is less likely to meet Congress’ desire to maximize auction proceeds to fund a planned nationwide public safety broadband network, to compensate broadcasters for the auction of their spectrum and to reduce the federal budget deficit. A recent Georgetown University study contends that severe bidding restrictions could cut revenues by as much as 40%.
With the Spectrum Act, Congress reaffirmed that sunshine always improves decision-making. In the past, the spectrum screen was adjusted without public notice or debate, during reviews of individual transactions, and then applied broadly to the entire industry. That’s a recipe for uncertainty that makes companies wary to invest, thereby doing consumers a disservice.
Further, the screen often has been applied inconsistently. For example, when determining the total amount of spectrum that can be used effectively for mobile service in a given market, a huge chunk of Sprint/Clearwire (S)spectrum over which mobile broadband service is now provided is excluded from the FCC’s current screen. Regulators decided it was less valuable—even though Sprint/Clearwire today uses that spectrum to compete in the broadband market.
Irrespective of DOJ’s specific policy prescription on spectrum aggregation, the FCC should avoid using the incentive auction design process as a vehicle to craft spectrum policy. Spectrum aggregation policies should be considered and adopted in a separate, transparent rulemaking that will then apply uniformly to every company and all spectrum transactions—everybody needs to know and live by the same rules.
In contrast, imposing an ad-hoc spectrum rule limiting carrier participation in the 600 MHz auction is likely to complicate and delay the auction despite bipartisan agreement—at the FCC, in the Obama Administration and in Congress—that speed is vital for allocating urgently needed spectrum to meet consumers’ needs.
Good spectrum policy is about continuing to provide the best wireless service in the world so we stay connected 24/7 without delays, dropped calls or slow downloads. That keeps us happy, and for some of us, even spoiled. It requires designing an auction in which every qualified bidder has a chance to acquire the spectrum needed to satisfy its customers. It means keeping auction rules “simple,” as FCC Commissioner Jessica Rosenworcel has suggested.
To promote competition and innovation in the long run, it means addressing the spectrum screen in a separate rulemaking through an open process with public input.
Originally published at The Street