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CCIA and CCA Brief Hill Staffers on Upcoming FCC Spectrum Auctions

May 31, 2013

On May 30, 2013, CCIA and Competitive Carriers Association hosted a panel briefing on wireless competition and the upcoming FCC wireless spectrum auction.  In a Senate committee room on Capitol Hill, anti-trust and wireless policy experts spoke to a room of congressional staffers and reporters about the necessity of appropriate FCC rules for ensuring fair competition in the wireless market.

The speakers were: Jonathan Baker, Professor at American University Washington College of Law, Stanley Besen, Senior Consultant at Charles River Associates, Mark Cooper, Director of Research at the Consumer Federation of America, and Chip Pickering, a former member of Congress and Partner at Capitol Resources, LLC. Cathy Sloan, Vice President of Government Relations at CCIA, served as moderator.

The FCC auction, which will include 5MHz blocks in the 600MHz band, is particularly important to mobile companies because it will give them access to lower frequencies (generally those under 1GHz), which travel well over long distances and are more capable of penetrating buildings.   For consumers, this means better, more consistent reception and faster downloads on their mobile devices.

The overarching theme of the discussion was simple: appropriate FCC auction rules should ensure fair market competition in the wireless industry, which will in turn promote technological innovation and keep downward pressure on consumer prices.

The potential effects of inadequate FCC rules are devastating.  AT&T and Verizon, who, according to an April filing by the Department of Justice’s Antitrust Division, currently control 78% of the high-quality low-frequency mobile spectrum, could gain substantially more of it.  This potential wireless duopoly would allow the dominant companies to charge exorbitant rates without improving their technology, leaving consumers without recourse to alternate providers.  It would also increase the likelihood of collusion between the big companies.  Whether they would actually abuse their market power is a matter of speculation, but, as Mr. Cooper somewhat cynically stated, “that’s what you do with market power, you abuse it.”  In any case, monopolies and duopolies are contradictory to basic free-market economic principles, and their existence threatens the proper functioning of a competitive wireless marketplace.

The panelists also made it clear that FCC rules could be applied  without reducing important federal revenue from the auction.  Mr. Besen explained that if large companies are unrestricted in their bidding, smaller ones will be precluded from access to the auctions because the anticipated prices will be driven so high.

On the other hand, if everyone knows the bidding reach of big-money players will be limited, then anticipated prices will fall.  This will likely increase the amount of participants, causing the actual prices of spectrum blocks to rise with demand.  As Mr. Pickering aptly put it, “history shows the more bidders you have, the more revenue you have.”  Mr. Baker echoed this sentiment, saying, “auction participation will drive revenues.”

If, as Ms. Sloan suggested, “spectrum is the oxygen that wireless carriers need 24/7 to operate their networks and serve customers,” then licensing a disproportionate amount of that spectrum to only two major companies will suffocate smaller wireless companies and strangle the free-market principles that are the life force of our American economy.

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