Editor’s Note: Welcome to our weekly Reality Check column where C-level executives and advisory firms from across the mobile industry share unique insights and experiences.
With a freshly installed chairman and full complement of commissioners now in place at the Federal Communications Commission, the details of upcoming spectrum auctions are now taking center stage in wireless policy circles. As highly technical as it is high stakes, the debate boils down to will government act quickly and constructively to advance U.S. wireless innovation and help all Americans avoid spending more time with the universally reviled “loading symbol of doom.”
How these auctions are constructed is policy issue number one. While some might argue for the populist-sounding notion that the FCC should restrict the two largest wireless companies – AT&T and Verizon Communications – from segments of the auction so certain other companies can have a bidding advantage, this approach could adversely and severely impact hundreds of millions of U.S. wireless consumers.
A rising mountain of evidence from past auctions in the United States and around the world has profoundly shaken the idea that these restrictive and exclusionary programs help wireless customers in the long run. Analyses from a range of voices show that companies of all sizes are best able to access the spectrum they need and get it into use for consumers and innovators alike when auctions don’t limit who participates. In fact, a new paper by Mobile Future shows that across nine mobile broadband auctions conducted in the United States over the past 10 years, nearly half of the spectrum – 46% – went to companies other than the big four nationwide carriers – all with no participation restrictions in place.
By contrast, where governments have intervened, arguably with the best of intentions, the results have been near universally calamitous – costing billions in lost auction revenues and leaving corporate bankruptcies, protracted litigation and spectrum delays in their wake.
One key misperception is that without more restrictive government rules, these pivotal auctions will take place in a climate akin to the “wild west” – one scot free of consumer safeguards. While it hardly makes for a flashy sound bite, the far less dramatic truth is that the FCC has ample existing authorities to do its job without having to resort to the anti-competitive and anti-consumer approach of proactively picking winners and losers before the first bid is even made. Among them:
–The FCC can and does screen winning bids to assess their competitive impact. If new spectrum acquisitions tip a company’s share of spectrum in a certain geographic market over one-third, the FCC takes a closer look at competitive conditions in that market and can require specific divestitures.
–The FCC can and does require winning bidders to build out their networks in a timely manner to ensure new spectrum becomes new capacity for mobile broadband users. This wards off concerns that companies might “warehouse” spectrum to keep it out of rivals’ hands.
–The FCC can continue to use its long-established designated entity program to provide bidding credits to small businesses to facilitate their acquisition of spectrum resources without excluding other competitors.
Outside of the auction process, the FCC also blesses commercial transactions where spectrum licenses change hands. The telecom sector is dominating global mergers and acquisitions in 2013. In the United States this trend has been driven in no small part by companies turning to the marketplace to meet the growing needs of their customers and to “align” their spectrum assets as efficiently as possible. This activity has been characterized not only by M&A, but spectrum swaps, leases and other market-driven arrangements.
Taken as a whole, these tools offer the new chairman quite a bit of discretion to get the job done right.
In his first weeks at the FCC, Chairman Wheeler has made clear he seeks to lead a “nimble” agency that “protects consumers and serves the public interest.” Staying true to these values – and the discipline of concrete facts and critical thinking over assumptions – will lead to a tremendously successful chairmanship. And nowhere is his success more important to our nation’s economy and consumers than in this critical task of spectrum auction rules and design.
Mobile Future Chair Jonathan Spalter, a technology executive and former senior federal government national security official, leads a coalition of technology companies/stakeholders dedicated to increasing investment and innovation in the burgeoning U.S. wireless sector.
