Bob Hope made a lot of money telling jokes, but he made a great deal more in the real-estate business. Asked to explain his real-estate investment strategy, he said, “I just went out to where the streets stopped and bought the property.”
This is the best spectrum strategy currently available. But where in the airwaves do the streets stop?
One answer is up high … up in the Local Multipoint Distribution Service stratosphere of frequency use. I strongly suspect that these huge swatches of bandwidth will sell for a record low price measured by megahertz per pop. There are said to be serious technological problems relating to line of sight. There are no clear business strategies for developing broadband uses of the spectrum. The Federal Communications Commission’s procompetitive policy of excluding incumbent telephone companies and cable firms will lower the bidding.
Yet there are no other large clear spaces of spectrum likely to come on the private market in the foreseeable future. The intrepid LMDS investor doesn’t need Bob Hope’s sense of humor, but will have to share the comedian’s undaunted faith in the growth of America. This faith will be rewarded, over some term of years. Eventually, LMDS will be a prime method of delivering big bandwidth to homes, with adequate return paths for sophisticated e-commerce and humble multiline telephone service.
Another place the streets stop is digital television. This spectrum still entices few broadcasters into aggressive investing. Being reasonable folks, they fail to see the merit of further fractionalizing their own diminishing audiences by offering digital fare that competes with customary over-the-air analog broadcast. Nor do they imagine their tiny spectrum slices give them enough channels even in a multicasting model to compete with analog cable-and much less with digital cable.
Yet this spectrum is inherently valuable. Its propagation characteristics are desirable. Inventing receiver technology for these frequencies will be a piece of cake. Somewhere, sometime, someone will make valuable use of this spectrum.
A third place the streets stop is at the door of private use. There are vast stretches of so-called private spectrum-licenses in the hands of corporations that use the airwaves for internal, non-retail purposes. This spectrum could be devoted to retail, big-bandwidth uses. Eventually, someone will have the zeal to promote such uses, the way Nextel Communications Inc. was built on a collection of postage stamp-sized licenses put together in inevitable response to the irrationality of the cellular duopoly.
All these Hoped-for real-estate projects in the air will promote the development of the information highway to every house in the country. The attendant benefits of economic growth from computer hardware and software sales, and flourishing e-commerce, will make our next generation rich.
The big risk to this rosy future is the FCC. The history of spectrum policy at the FCC is for the most part a lamentable story of inflexible, bureaucratic policies that have promoted individual firms rather than the general goal of putting more spectrum into private hands. For example, whenever the National Telecommunications and Information Agency and the FCC combine resources to take spectrum from public users, such as the defense department, and put it into private hands, the typical lobbying response is to complain. Why? Because more spectrum in private hands means more competition for existing users and existing wire-based firms that inevitably see wireless as a substitutable product.
FCC commissioners are always hard-pressed by lobbyists and Congress not to release spectrum promptly and generally into private users. They are always pressured into restricting the form of use so as to limit competition, innovation and entrepreneurship. The lobby for flexible use is scarcely extant. It could come from Silicon Valley, but the Valley usually has other fish to fry. Lobbying abhors a vacuum. So the silence of the computer world is replaced by the clamoring advocacy of incumbent firms seeking to restrict flexibility and limit the release of new spectrum.
Bob Hope’s happy philosophy was dependent on zoning authorities welcoming the extension of new roads where no one had travelled before. The information highway is such a road. Here’s Hoping that government will let it be built out any which way invention wants it to go.
Reed Hundt is the former chief of the Federal Communications Commission.
