The FCC Must Stay on Course on Mobile Competition
It’s a big task, made all the more complicated by the number of public interest considerations the FCC has to balance, and by the fact that the agency can’t compel broadcasters to give up their licenses. All it can do, under the statute that Congress passed, is create incentives for TV stations to surrender those licenses voluntarily.
Volunteering is more lucrative than it used to be, at least in this case. In return for pitching in, TV stations that participate will receive a portion of the money that companies like AT&T, Verizon, Sprint and T-Mobile pay in an auction for the right to use that spectrum.
Or will all of those companies seek those rights? There’s the first issue the FCC faces, if this “reverse” auction works and incentivizes TV stations to give up some inventory: Will multiple mobile carriers be able to bid for this spectrum, which is the lifeblood of any wireless service? Or will it be gobbled up by the two dominant players, AT&T and Verizon? Those two enjoy a powerful duopoly, controlling nearly 80 percent of the frequencies most valuable for mobile broadband, and more than 80 percent of the profits for the entire U. S. wireless industry.
Some have suggested that this type of imbalance is no cause for concern, and argued that improving the chances for meaningful competition among wireless providers won’t matter much for wireless users. While it’s a favorite trick of powerful incumbents to attack smaller companies’ arguments about competition as “self-serving,” there’s no mistaking the benefits to the public and the broader economy of having lower prices and better service available from someone other than the two biggest carriers.
The ultimate aim of the FCC’s efforts to design this auction is to increase the chance for a wide assortment of wireless carriers to bid. That would give individuals and businesses that rely on wireless connectivity more providers that would work hard to get and keep our business, not just rest on their laurels and their market power.
That hasn’t stopped AT&T and Verizon from spreading all sorts of disinformation about the process, however, in an attempt to make it look as though the government is out to get them. (Life’s tough for $100 billion companies, isn’t it?)
To start with, there’s this notion that the FCC is dragging its feet or asking too many questions about this auction process — all at the urging of those competitive carriers. While it’s not a good thing that FCC proceedings stretch on so long, it’s hardly due to unprecedented demands by any potential bidders. The last time the FCC cleared TV channels and auctioned those frequencies for mobile use, the whole process took about eleven years, running from 1997 till 2008. As cooler heads have noted this time around, it’s still more important to get this done right than to get it done right now.
The Department of Justice has added valuable insights to the process, in an important filing outlining the motives that dominant players like AT&T and Verizon have to bid on spectrum just to keep these valuable resources out of rivals’ hands. That’s the same concern the DOJ expressed in 2010 when it explained how auction design “can go wrong in the presence of strong wireline or wireless incumbents, since the private value for incumbents in a given locale includes … ‘foreclosure value’” derived from keeping competition at a minimum. AT&T and Verizon, the dominant incumbents on both the wireless and wireline side, can and do leverage their positions to keep competitors out.
So the FCC can and should take special care to avoid such results in the upcoming auction of the reclaimed TV band, because these frequencies are especially well suited for mobile broadband service. Low-band spectrum is more valuable because it lets wireless carriers cover more territory with fewer cell sites, and it provides better coverage indoors because it travels through walls and other obstacles better than signals at higher frequencies do.
All carriers acknowledge its special characteristics and tremendous advantages. AT&T CEO Randall Stephenson said in an interview just last year that low-band spectrum “propagates like a bandit.” And Verizon CTO Tony Melone reported that using such frequencies gives Verizon “tremendous propagation advantages” for 4G services because “there will be fewer sites required and we’ll have better building penetration.”
Yet somehow in the current debate, these two carriers have tried to reverse course and sell the flatly incorrect argument that the airwaves in the upcoming auction are the same as all others. Their hypocritical claim that low-band spectrum is of no special significance any more is a lot easier to understand once you realize that they already have plenty of it, and that they just want to pull up the drawbridge.
Trade groups with innocuous-sounding names like “Mobile Future” purport to bolster the incumbents’ case about the evils of “tampering” with auction design. But take a look at Mobile Future’s membership — and what do you know, it’s AT&T and Verizon again, in a different guise. (No offense to the Arkansas Grocer and Retail Merchants Association, but I doubt that it or the Worcester Regional Chamber of Commerce is calling the shots there.)
Nobody is talking about tampering with the auction, or keeping AT&T and Verizon out of it. The statute simply says the FCC can’t altogether prevent anyone from taking part, and it specifically preserves the agency’s authority for general rules that “promote competition” and prevent excessive concentration of spectrum licenses in any one company’s hands.
The FCC is on course to consider the right questions in this proceeding. It’s far from completing that course, and has any number of decisions to make along the way. The suggestion that competitive considerations are off track is a self-serving statement made by the big carriers in the best position today. Of course they see no need for more competition or faster innovation. But the FCC, the Department of Justice and the rest of us know better.
Matt Wood is the Policy Director for Free Press, a nationwide, non-partisan, non-profit public interest group that fights for people’s right to connect and communicate on the air and online.