Competition is a critical ingredient for functioning
markets. Without it, we have market power, higher prices and market
failure. With it, we have new
offers for smartphones without contracts or penalties for consumers, WiFi
calling for businesses and more.
When asked recently in a public forum, why mobile phone
coverage and services are so poor in the U.S., Eric Schmidt of Google said that
it was because we do not have enough telecom competition.
Spectrum is the oxygen that all wireless carriers need
24/7 to operate their networks and serve customers. For over 10 years, FCC rules have included a “spectrum
screen” which roughly prevents any one carrier from amassing licenses for more
than one third of total mobile spectrum.
This is a policy explicitly designed to promote and enable a competitive
market.
In the mobile wireless business today however, the largest
two carriers, AT&T and Verizon, control 78% of high quality low band mobile
spectrum. They began to
acquire this position originally from direct FCC assignments made to wireline
telephone companies in the government-structured duopoly cellular markets of
the 1980s. Cellular frequency
block assignments were made city by city (actually metropolitan areas), which
is why at first there was no rural service coverage at all.
In the 1990s, the FCC conducted pro-competitive auctions
of mobile PCS spectrum that first broke open the geographic wireless
duopolies. However, less than 10
years later, industry consolidation became the norm, and then another spectrum
auction in 2008 resulted in a sweep of valuable 700MHz spectrum by AT&T and
Verizon, yielding a setback for competition.
The FCC is planning to auction additional spectrum next
year that it expects will be harvested from TV broadcasters via the so-called
incentive auction program. Part of
the housekeeping preparation for the incentive auction is a comprehensive FCC
review and overhaul of its outdated spectrum screen.
Access to superior quality low band spectrum below 1G is a
critical competitively significant factor recognized by the Justice Department
in a detailed recommendation it made to the FCC last month. Clear caps on the amount of premium
mobile spectrum that may be licensed to any one company will provide greater
predictability for bidders and an opening for smaller carriers to secure at
least some of the newly available spectrum, so that they can still offer
consumers competitive choices for mobile broadband.
