‘Spectrum Crunch’ Tied to FCC’s Actions

‘Spectrum Crunch’ Tied to FCC’s Actions
March 26, 2012

Kenneth Artz

Kenneth Artz (iamkenartz@hotmail.com) is a freelance reporter for The Heartland Institute based in... (read full bio)

No one knows when the United States will run out of wireless spectrum, but many in the industry agree a crunch is coming. According to Federal Communications Commission estimates, the nation currently has a slight spectrum surplus, but it will turn into a deficit as early as next year. When spectrum runs short, service will degrade sharply, meaning more dropped calls and slower data speeds.

Verizon’s February FCC filing requesting the agency’s permission to purchase $4 billion worth of Advanced Wireless Spectrum (AWS) licenses from cable companies has prompted complaints the FCC is mishandling spectrum allocation to placate Verizon’s competitors and public advocacy groups who claim approval of the purchase would hurt competition in the wireless market. 

Jim Lakely, director of communications at The Heartland Institute, which publishes InfoTech & Telecom News, says allowing the Verizon deal to proceed “will hardly kill competition in the wireless field. There is plenty of spectrum out there to go around, but federal regulators—especially the FCC—have created an artificial scarcity by dragging their feet and not freeing it up for its best market use, which is wireless telecommunications,” he said.

FCC Obsession a ‘Travesty’
Complaints from T-Mobile USA, Sprint Nextel, Public Knowledge, and the National Consumer Law Center have been filed with the FCC in an effort to block Verizon’s specturm purchase. Public Knowledge staff attorney Jodie Griffin says if the Verizon deal happens, it could be “to the detriment of smaller wireless carriers and to the detriment of consumers.”

In its FCC filing, T-Mobile claims Verizon’s purchase of the spectrum would make it unavailable to smaller competitors—such as T-Mobile—who would use it more quickly, intensively, and efficiently than Verizon.

That’s not sufficient reason to block the sale, Lakely says. “The current owners should be allowed to sell their spectrum without interference,” he said. “By attempting to put the kibosh on the deal, regulators and activist groups would deny them the right to sell their own property.

“And those sales should be moving a lot quicker than they are currently,” Lakely continued. “It is a travesty that the current FCC's obsession with micromanaging the wireless industry has created a market in which each player heads to Washington to complain about every business decision, merger, and cooperative deal of their competitors. Few other industries have to go hat in hand to federal bureaucrats to ask permission to meet the demands of their customers. But that's the absurd position in which the FCC has placed the wireless sector—and its customers who lose with slower service and fewer features.”

Wireless Competition Increasing
Ed McFadden, vice president of Verizon policy communications, says the U.S. wireless industry is one of the most competitive and innovative in the world. Consumer prices for wireless services are decreasing while the services and choices in devices, data plans, applications, and other wireless services are expanding.

"You have to keep in mind that competition in the wireless space isn't limited to just companies like Verizon, Sprint, or AT&T,” McFadden said. “You have device manufacturers competing, applications and operating system developers competing, [and] companies that offer different kinds of services that consumers can use on wireless devices. All of them are competing against each other, sometimes partnering. It is perhaps a new form of competition, but it's a highly competitive market," McFadden said.

Services Improving Steadily
Bartlett D. Cleland, policy counsel for the Institute for Policy Innovation, a public policy institute based in Lewisville, Texas, agrees with McFadden, adding that all the market data and surveys confirm competition is increasing in the wireless market

“Technology and services are changing daily, which all points to benefits for the consumer. For instance, when the speed of a service increases, the price may go up 20 percent, but the speed may increase 100 percent. As a result, consumers can download more data and stream video faster, but all the critics do is complain about the price going up 20 percent. Well, what about the value that is added by the advances in technology?” he asked.

“Some are trying to cast the debate about Verizon's desire to purchase unused spectrum as a question of whether Verizon needs the spectrum,” Cleland continued. “That framing is simply silly. The correct question is whether consumers and innovation need more spectrum to come off the sidelines and get in the game. The answer is painfully obvious—it is a full-throated ‘yes,’” said Cleland.

Lakely agrees. “A free market in wireless can and will work to the benefit of consumers if the FCC would simply get out of the way and stop thinking it is smart enough to make every decision in an increasingly complicated sector of the economy,” he said.

Kenneth Artz (iamkenartz@hotmail.com) writes from Dallas, Texas.

Kenneth Artz

Kenneth Artz (iamkenartz@hotmail.com) is a freelance reporter for The Heartland Institute based in... (read full bio)