Innovation Policy Post

As the FCC develops ground rules for Incentive Auctions, in which spectrum relinquished voluntarily by TV broadcasters will “go on the market” and be auctioned, the two prospective bidders already holding the largest amount of spectrum, including what’s considered the “best” spectrum below 1 GHz, naturally argue for a “free market” approach with no restrictions on the amount of spectrum that can be licensed to any one corporation.   But is that approach truly a “free market” one?   Not if you consider the marketplace headstart  and continuing advantages enjoyed by these two dominant carriers,  AT&T and Verizon, both legacies of monopoly Ma Bell.   CCIA detailed this phenomenon in an FCC filing at the end of November.  For example, AT&T and Verizon today control 86% of mobile spectrum below 1 GHz in the top 10 U.S. markets and 80% in the top 50 markets.

Less than two months have passed since the World Conference on International Telecommunication (WCIT) in Dubai came to a halt over a controversial vote that would have extended a UN treaty largely centered around voice telecommunications to the Internet. Critics of the proposed revisions to the International Telecommunication Regulations breathed a bit easier as 55 of the 144 eligible delegations at the UN-sponsored conference failed to endorse Quality-of-Service rules, access fees and other strictures on the open Internet. Even with the remaining 89 member delegations as signatories, the treaty is mostly inert without participation by the US, Japan, European Union members and other nations that demurred.

The FCC’s Incentive Auctions rulemaking docket is titled: “Expanding Economic and Innovation Opportunities of Spectrum…”   With an increasing majority of the American TV audience choosing to consume their video programming via wired or wireless broadband,  rather than over the air broadcast signals, new spectrum to be voluntarily relinquished by TV broadcasters will become available to the highest bidders in the mobile broadband business, hopefully to boost coverage and capacity. The public safety network and the U.S. Treasury also stand to gain something in the bargain.   Not end of story.   Spectrum holdings limits currently under consideration by the FCC in a separate parallel proceeding should prevent further concentration in the amount of spectrum controlled by the mobile wireless duopoly, thereby leaving some chance of winning bids by smaller carriers.   And some of the available spectrum should not be auctioned or licensed at all. 

The ITU has not revised its regulations (ITRs) governing things like satellite spectrum slots and telephone network connections since 1988.  No matter, the global Internet is working very well anyway.   

Except where there’s little or no access. Some countries that have struggled with the economics or politics of broadband access, and sometimes both, are looking to the ITU for help.

Earlier this week, the FCC filed a Court brief in defense of its open Internet rule that has been challenged by Verizon and one small wireless carrier, Metro PCS.   Verizon claims to support the Internet remaining “an unrestricted and open platform, where people can access the lawful content, services and applications of their choice.”   It simply objects to an FCC rule enforcing that same ideal on behalf of end users and edge providers who must depend on Verizon for that access every day.

The problem with the dream of a free market in telecommunications networks is that barriers to entry are too high.  So high in fact that that the largest cable TV operators who not so long ago were given exclusive franchises to build local networks that might compete in a digital world with legacy monopoly telephone companies, have decided not to bother with the wireless part.  And Verizon with its lock on lucrative access lines for business customers and its dominance of mobile wireless has decided not to bother with any more fiber optic lines to challenge cable’s dominance of residential Internet access and video entertainment.

Randall Stephenson, CEO of AT&T, and Glenn Hutchins, Co-Founder of Silver Lake, spoke at the Brookings Institute last week on how to further the mobile technology revolution.  

Last week CCIA filed Comments in the FCC’s 2 GHz rulemaking proceeding.  The Commission’s proposed rules would grant mobile satellite spectrum (MSS) licensees flexibility to use their licensed spectrum to deploy mobile voice and broadband services – increasing the amount of spectrum available for these services.

CCIA applauds the FCC’s Notice of Proposed Rulemaking on service, technical, assignment, and licensing rules for flexible terrestrial use of spectrum currently assigned to the Mobile Satellite Service (MSS) in the 2 GHz band.  CCIA strongly urges the Commission to expedite its rulemaking process so that licensees in the 2 GHz band can move quickly to deploy their planned mobile broadband networks.

Last night the House of Representatives passed HR 3630 - legislation extending payroll tax cuts.  Tucked into the bill is authority for the FCC to conduct incentive auctions of wireless spectrum.  

Ahh, the co-ordinated effects possible between two giant duopolists.

On Monday CCIA filed Reply Comments  with the FCC in support of LightSquared’s proposal to begin deployment of its nationwide wholesale 4G LTE network.  LightSquared’s wholesale wireless network, once deployed, would expand high-speed broadband access to millions of unserved Americans, make an additional 40 MHz of wireless spectrum available for mobile broadband, spur economic growth and job creation, and increase competition in the wireless marketplace.