Resurrection of the spectrum cap could prove tricky for the Federal Communications Commission next year when Democrats seize control of the agency, given President-elect Barack Obama’s call for expanded broadband deployment in a market dominated by telephone and cable TV giants and the promise of wireless technology to bring high-speed Internet access via cellphones, laptops and other devices to a highly mobile society that increasingly demands instant access to information.
The Rural Telecommunications Group, whose members include independent mobile carriers and those affiliated with rural telephone companies, wants the FCC to prohibit a wireless operator from controlling more than 110 megahertz of spectrum below the 2.3 GHz band in any one market. RTG’s petition has attracted support from small and regional cellular operators.
The industry’s four nationwide operators – Verizon Wireless, AT&T Mobility, Sprint Nextel Corp. and T-Mobile USA Inc. – which have benefited from recent consolidation to control the lion’s share of commercial spectrum, argue that reviving the spectrum cap would hinder efforts to roll out wireless Internet service at a time when the United States is trying to improve its faltering global stature in broadband penetration. There are only a handful of markets where a carrier’s spectrum position would violate the proposed cap.
Flexibility concerns
Cellular association CTIA said FCC merger and auction review policies provide regulators flexibility to address competitive issues, including roaming arrangements that rural wireless providers claim are unreasonable and have driven small service providers out of the market. Major carriers said the emphasis should be on the evolving shift from broadband-to-the-home to mobile-broadband-to-the-person.
“The United States should not squander the amazing opportunities that fourth-generation technologies will bring to American citizens,” said CTIA. “There must be a focus on embracing the intersection of consumer demand for mobility, the unbelievable benefits that mobile technology will bring, and the need for more spectrum. An increased focus on bringing more licensed spectrum to market will facilitate the United States’ broadband competitiveness compared to the rest of the world.”
CTIA officials recently met with members of the Obama-Biden transition tech team. It is unclear how the Obama administration will balance its push for universal broadband and campaign criticism of Bush antitrust oversight during a period when more than a dozen wireless mergers were approved – some requiring the divestiture of wireless assets.
The Wireless Communications Association International, whose members include WiMAX-merging parties Sprint Nextel and Clearwire Corp., asserts a spectrum cap is too rigid a regulatory tool for a dynamic marketplace in which consumer demands require significant bandwidth.
Competition at stake
The FCC enacted a 45-megahertz spectrum cap in 1994 during the Clinton administration. The cap was later raised to 55 megahertz before being eliminated in 2003 by the commission under former chairman Michael Powell. Telecom regulators later moved to a 70-megahertz “spectrum screen” in analyzing proposed mergers. Under FCC Chairman Kevin Martin, the screen – an internal benchmark designed to trigger closer scrutiny of markets involved in wireless mergers – has ranged between 95 megahertz and 145 megahertz per market in merger analyses.
Small- and mid-size carriers insist they – and by extension consumers – have been hurt by industry consolidation. They say reinstating the spectrum cap could help alleviate a competitive imbalance that has been exacerbated by lack of small licenses in major spectrum auctions in recent years.
“The nation’s largest carriers have systematically absorbed dozens of small, rural and regional competitors,” Leap Wireless International Inc. told the FCC. “In place of the vigorous competition that had flourished in this industry, which drove market participants to reduce prices and explore innovations in technology and service, a few carriers now dominate the landscape. These supercarriers have both the incentive and the ability to foreclose entry to new competitors and to engage in other anticompetitive behavior to protect their market position.”
Verizon Wireless and AT&T Mobility, the big winners of the 700 MHz auction earlier this year, together account for about 159 million of the nation’s 269 million cellular subscribers.
U.S. Cellular Corp. said the spectrum screen has proved inadequate; a conclusion shared by House telecom subcommittee Edward Markey (D-Mass.) and FCC member Michael Copps. Copps could become acting FCC chairman in the Obama administration. “If wireless competition is to be preserved at a time when the amount of ‘greenfield’ wireless spectrum will be severely circumscribed, new approaches to safeguard it will have to be adopted by the FCC,” U.S. Cellular stated.
Mid-Rivers Cellular, a rural carrier based in Circle, Mont., said RTG’s spectrum cap proposal “represents a reasonable accommodation of the public interests in allowing carriers to aggregate spectrum in a flexible fashion while ensuring that spectrum cannot be warehoused for anticompetitive purposes.” Such a scenario could be realized if a spectrum cap were re-imposed, forcing larger carriers to divest wireless properties in rural areas.
