FCC’s McDowell argues for lighter regulatory touch: 700 MHz results show the big getting bigger

HOLLYWOOD, Calif. — With results from the Federal Communications Commission’s 700 MHz auction now public, Commissioner Robert McDowell said one thing stands out: large, deep-pocketed companies squeezed smaller (and in some cases newer) players out of the process — despite government mandates that were billed as an attempt at the exact opposite.
Open access, which the government imposed on the C Block, “sounds good if you say it fast, but when it comes in the form of a government mandate, what does it really mean?” McDowell asked rhetorically during a speech at the Tech Policy Summit here.
“What did prevail was the law of unintended consequences,” he said.
Although the open-access C Block was billed as a great opportunity for small, new players to enter the market, incumbent operators threw their financial weight around to insure continued dominance, McDowell said.
Verizon Wireless was the big winner in the 700 MHz auction, scooping up all of the C-Block licenses covering the continental United States. AT&T Mobility, another major, entrenched player, scooped up much of the remaining valuable spectrum.
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And McDowell said it is clear that operators saw unencumbered spectrum as the biggest prize. The money plunked down on the open-access C Block averaged around 77 cents price per megahertz/potential customer covered, while the B Block, which did not include open-access stipulations, averaged around $2.67 per MHz/pop.
However, the average price for C-Block licenses includes spectrum covering the Gulf of Mexico and other out-of-the-way locations. According to Optimal Markets Inc., the average price per MHz/pop for the C-Block covering the Mississippi Valley region was $2.36.
McDowell, a Republican, made it clear he views the recent auction as a failed opportunity to bring more companies into the wireless business.
A light touch
McDowell believes market forces should determine what technologies, services and business models rise to the top. Much like America’s Internet economy, wireless won’t succeed and improve by “government fiat” but by innovation and collaboration in a free market, he argued.
“The five of us (FCC commissioners) are not smarter than the public sector,” he said. “Regulation should be reserved only for market failure.”
And with half of the world’s population now owning a cellphone, McDowell doesn’t believe there’s any cause for government alarm.
“No technology has ever penetrated more deeply than this has,” he said of cellular communications.
Moreover, he believes wireless carriers’ business models were already evolving.
“The biggest unwritten story is that device and application portability were already coming to the market long before the FCC ever got involved,” he said.
The FCC took credit for the parade of carriers that announced plans to open their networks to more devices and applications during the past few months, but it wasn’t the government’s doing, McDowell said.
He pointed to new dual-mode devices being offered by carriers that operate on unlicensed spectrum such as Wi-Fi, as well as the growing number of unlocked devices that are entering the market. “Overly engineered mandates” were not responsible for that rush of open networks announcements, he said.
The carriers were simply opposing the mandates, not the concept, he said.