& cplSiteName &

Open Spectrum Auctions Open Door to Growth

Rick Boucher
8/16/2013
100%
0%

Imagine someone handing you, and only you, the winning Powerball numbers before the jackpot sequence was ever revealed. Sounds great if you're the person holding the ticket, but not exactly fair to everyone else.

The Federal Communications Commission (FCC) could hand its equivalent of a winning Powerball ticket to select communications companies in the upcoming spectrum auctions. As the FCC creates rules for the incentive auctions, it has the ability to stack the odds, restricting participation in the auctions by some mobile providers and essentially picking winners and losers among our nation's carriers.

Today, the wireless industry's future is in the hands of policy makers. The federal government expects to hold spectrum auctions in 2014 in which air frequencies currently used by broadcast television stations, but well suited for mobile broadband, will be put up for sale. Much is at stake in the way that the auction is structured and in its ultimate success.

Beyond the urgent need to supply carriers with the spectrum sufficient to serve consumer demand, the auction is expected to produce revenues for other key national priorities:

  • Up to $7 billion from the auction proceeds will be set aside for the creation of a national broadband network for local police, fire, and emergency services. "First Net," as it is known, will create a fully interoperable broadband service connecting local first-responders nationwide.
  • Broadcasters must be paid from the auction revenues as an incentive for their donation of spectrum to the auction.
  • Broadcasters that choose not to donate spectrum but to continue over-the-air broadcasting may be required to relocate to another channel so that a continuous band of spectrum attractive to commercial bidders can be created for the auction. Broadcasters who are part of this "repacking" have been promised reimbursement of their relocation costs from the auction proceeds.
  • And federal policy makers are expecting that after the foregoing needs have been met, there will be ample auction proceeds available for budget deficit reduction.

In order to meet these multiple needs simultaneously, it's essential that the auction be open to all financially qualified bidders. Some have suggested that the largest mobile carriers be restricted in their ability to participate fully in the auction in order to favor smaller carriers. Limiting the ability of the largest carriers to purchase the spectrum their customers are demanding will mean fewer services for consumers and lower auction proceeds, rendering very difficult the challenge of meeting all of the competing and urgent demands for the auction revenues.

Moreover, it is not at all clear that spectrum acquisition restrictions on the largest carriers would actually promote competition.

For example, FCC data shows that the third-largest carrier, Sprint Corp. (NYSE: S) (including Clearwire), controls over one third of the mobile wireless spectrum held by US carriers -- far more than any other provider.

The fourth-largest carrier, T-Mobile US Inc. , recently acquired Metro PCS with its significant spectrum holdings, and the merged company can now rely for spectrum acquisition financing on the deep pockets of Deutsche Telekom AG (NYSE: DT), which has controlling ownership of T-Mobile.

Neither of these two providers requires special treatment in the auction. They either have sufficient spectrum or the resources to acquire it without tampering with the auction rules.

These realities were recognized by Congress when it passed the 2012 legislation authorizing the incentive auction of broadcaster-held spectrum to the mobile carriers. In the authorizing statute the FCC is prohibited from excluding from the auction financially qualified bidders. That provision underscores Congressional intent that the auctions be open to all and argues strongly for a process that enables every carrier to bid for spectrum sufficient to meet its needs in every market that it serves.

Creating rules for the incentive auction is now in the hands of the FCC and will provide an early test of the leadership of the agency's new chairman. The wireless industry is one of America's economic bright spots, highly successful and highly competitive, with 80 percent of Americans having a choice of five or more wireless carriers.

The FCC should choose to sustain the industry's success by creating a level playing field fair to all as the incentive auction is launched. The ambitious goals of the incentive auction can only be achieved if all qualified bidders are welcomed into the process.

Let's allow carriers to acquire the spectrum they need to meet consumer demand. Competition in a truly open auction should determine the winners and losers, not the FCC.

Disclaimer: Boucher advises AT&T in his role as head of the Government Strategies Practice at Sidley Austin. AT&T is also a leading funder of the Internet Innovation Alliance.

— Rick Boucher, Honorary Chairman, Internet Innovation Alliance

(2)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
acohn
50%
50%
acohn,
User Rank: Light Sabre
8/16/2013 | 7:02:32 PM
Re: Spectrum debate
The author had AT&T as a Top-10 campaign contributor the last several election cycles where he was elected.  Enough said.
Sarah Thomas
50%
50%
Sarah Thomas,
User Rank: Blogger
8/16/2013 | 4:08:21 PM
Spectrum debate
Thank you for the post, Rick. It's certainly a poignant topic right now. AT&T and T-Mobile are fighting it out this week. Sounds like you are on AT&T's side that T-Mobile's sliding spectrum screen would be unfair? It does seem unfair to let the big two dominate the auction, however, Sprint and T-Mobile aren't so small anymore. What do you see as the biggest problems with a proposal like T-Mobile's that caps the amount of spectrum any single carrier can get, but only after the auction hits its revenue target?
More Blogs from Column
It's clear that SD-WAN is now seen as the enterprise networking architecture of the future, which is why this market will reach billions of dollars.
There is nothing wrong with large amounts of debt if you methodically expand a business, but what are these guys doing?
Market forces are working well in the business data services (BDS) market in the US, argues Bruce Mehlman, co-chairman of the Internet Innovation Alliance.
Mobile operators moving to virtualized networking for 5G infrastructure need to carefully consider the motivations behind the move and make the right choices at every step along the way.
Cheenu Seshadri, the managing partner at Three Horizon Advisors, looks at the market concentration risks of letting T-Mobile and Sprint merge.
Featured Video
From The Founder
John Chambers is still as passionate about business and innovation as he ever was at Cisco, finds Steve Saunders.
Flash Poll
Upcoming Live Events
June 26, 2018, Nice, France
September 12, 2018, Los Angeles, CA
September 24-26, 2018, Westin Westminster, Denver
October 9, 2018, The Westin Times Square, New York
October 23, 2018, Georgia World Congress Centre, Atlanta, GA
November 7-8, 2018, London, United Kingdom
November 8, 2018, The Montcalm by Marble Arch, London
November 15, 2018, The Westin Times Square, New York
December 4-6, 2018, Lisbon, Portugal
All Upcoming Live Events
Hot Topics
Telco Job Prospects Go From Bad to Worse
Iain Morris, News Editor, 6/22/2018
Larry Ellison Laughed at the Cloud, Now the Cloud Is Laughing Back
Mitch Wagner, Executive Editor, Light Reading, 6/20/2018
Mavenir's Billion-Dollar Blueprint
Ray Le Maistre, Editor-in-Chief, 6/18/2018
5G Transport – Where Do We Start?
Ray Le Maistre, Editor-in-Chief, 6/21/2018
Animals with Phones
Backing Up Your Work Is Crucial Click Here
Live Digital Audio

A CSP's digital transformation involves so much more than technology. Crucial – and often most challenging – is the cultural transformation that goes along with it. As Sigma's Chief Technology Officer, Catherine Michel has extensive experience with technology as she leads the company's entire product portfolio and strategy. But she's also no stranger to merging technology and culture, having taken a company — Tribold — from inception to acquisition (by Sigma in 2013), and she continues to advise service providers on how to drive their own transformations. This impressive female leader and vocal advocate for other women in the industry will join Women in Comms for a live radio show to discuss all things digital transformation, including the cultural transformation that goes along with it.

Like Us on Facebook
Twitter Feed