WASHINGTON — It’s not as if there’s harmony in wireless carrier world regarding the structure of spectrum auctions, or even who does what best, but they do share a common goal—securing more spectrum.
“If you want to maximize auction revenues, you should sell one license. But I don’t think that’s what you want to do,” said Tom Ford, chief economist with the Phoenix Center in Washington. Ford was among the witnesses who testified Tuesday at a Senate subcommittee hearing on the state of U.S. wireless communications.
Ford was the most pointed among witnesses, who represented wireless carriers large and small, networks and consumers. He defended the position of larger wireless carriers calling for an unfettered spectrum incentive auction. Regulators and lawmakers are tossing around the idea of capping the amount of spectrum one carrier can control so that Verizon and AT&T don’t walk away with all the marbles at the next auction of TV frequencies, tentatively planned for June of next year.
“If you take roaming, for example… we have to force larger carriers with nationwide networks to allow smaller carriers to access their networks,” he said. “To some extent, if we keep imposing these rules, we’re forcing these things to fit” into a model that doesn’t reflect the market. “If you’re not big enough to serve the market, should you be in the market?”
What Steven Berry heard were fighting words. Berry is president and CEO of the Competitive Carriers Association, a lobby representing local and regional carriers, some with fewer than 5,000 customers.
“I don’t agree with much of anything Mr. Ford just said. If you live in rural America and you’d like to have access, there are carriers out there that would like to provide it,” he said. “That’s their business model. The larger carriers—that’s a decimal on their balance sheet.”
Berry referred to AT&T and Verizon as the “twin Bells,” leading the industry in a march toward duopoly. The two companies account for 67 percent of industry revenues, he testified, versus 35 percent for the two top auto makers, and 24 percent for the two top firms in the oil industry.
“Not surprisingly, the FCC has been unable to find ‘effective competition’ in the wireless industry in any of its last three annual competition reports,” he said in prepared remarks.
Steve Largent, former Congressman from Oklahoma and the president and CEO of the CTIA—The Wireless Association, said he wouldn’t get into the size debate, yet he did toss in a tidbit about 4G coverage, which is mostly the domain of larger carriers.
“Today, 90 percent of the people in the market are covered by LTE,” he said.
Berry supports making spectrum available in Cellular Market Areas rather than solely in nationwide swathes. He said that doing so would yield more auction revenues because more bidders would participate. The Federal Communications Commission has put the issue up for comment, to the chagrin of both large carriers and broadcasters who favor a consolidated band plan.
Interleaving wireless carriers and TV stations on the same channels in different markets would create unacceptable levels of interference, they say. Radio frequency expert and TV Technology contributor Doug Lung also points out that under the interleaved scheme, cellphones would need filters that could reject high-powered TV transmissions “in some markets, yet provide reliable wireless service in other markets,” which would be difficult. “Market-specific radios aren't the answer, as people will be taking their smartphones and tablets into other markets.” (See “FCC Reacts to Split-Band Broadband Wireless Plan Criticism.”)
How much broadcast spectrum will become available at auction remains to be seen. Participation is voluntary and anonymous, and the markets with the greatest wireless congestion and therefore demand for more spectrum, are also the most lucrative for TV stations.
“Whether a successful auction can be designed and implemented remains an open question,” Ford said. “The objectives and constraints on the problem are mind-boggling, and additional objectives and constraints are being proposed every day.”
He instead suggested that to obtain more spectrum, lawmakers would have to “pry it from the present owners’ hands, pry it from their cold dead hands, in some cases, I suspect.”
While broadcast spectrum is presumably desirable for its propagation characteristics, the “present owner” with the most spectrum is the federal government. Both Ford and Largent took aim at the federal spectrum holdings. Ford said federal agencies hold about half of the licenses between 225 MHz and 3.7 GHz. Largent estimated that the fed holds about 70 percent of all radio frequencies.
“We have to find a mechanism to coerce the government to give up spectrum,” Largent said.
More spectrum for wireless was a mantra at the hearing such that Bill Nelson, Democratic senator from Florida, asked Largent what would happen if lawmakers couldn’t squeeze it out broadcasters or federal agencies.
“To what degree can you make systems more effective and efficient if we can’t free up spectrum?” he asked.
Largent first said he’d leave those technical issues “to the experts,” and then suggested that wireless devices were reaching the threshold of efficiency.
“What you’ll see happen… my guess is, you’ll see higher prices. That’s how a carrier or a manufacturer deals with inefficiency in the marketplace,” he said.
Berry disagreed. “We are going to have to get better on the technology side, whether it’s software-defined antennas… there are other things we can do to enhance efficiency of spectrum.”
Sen. Ron Johnson (R.-Wis.) asked witnesses what was “the No. 1 stumbling block to more spectrum.”
Largent said keeping the 2014 auction on track, with two empty seats at the FCC.
“And broadcasters may not buy into it. Our companies are working with broadcasters… to free up 120 MHz if we can,” he said.
Berry said of broadcasters, “for all the good they’ve done, 90 percent of the people get their service over a cable or a satellite. I think we know where we have to go get it.”
Doug Webster, vice president of Service Provider Routing, Mobility and Video Marketing for Cisco, said, “A hurdle would be the lack of urgency to get as much spectrum as quickly as possible out into the marketplace. As for the voluntary incentive auction, the FCC needs to drive education. We can’t expect a broadcaster to understand all of the nuances of the telecommunications world.”
Webster also told Sen. Mark Pryor (D-Ark.), who is chairman of the Subcommittee on Communications, Technology and the Internet, that offloading data traffic onto broadcast networks likely would not work.
“That is one option to consider, but the large majority of demand right now is on-demand, where broadcasting doesn’t work,” he said.
~ Deborah D. McAdams
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