FCC Shouldn’t Pick Wireless Technologies

FCC Shouldn’t Pick Wireless Technologies
December 2, 2013

Scott Cleland

Scott Cleland is a precursor: a proven thought leader with a long track record of industry firsts.... (read full bio)
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Some wireless competitors and the DOJ/OSTP are urging the FCC to effectively change their spectrum aggregation rules to treat low-band spectrum-technology <1 GHz competitively different than high-band spectrum-technology >1 GHz.

If the FCC complies, it effectively would subdivide the current spectrum marketplace into two technology markets: <1GHz and >1GHz, for the first time in twenty years of spectrum auction history. It also would set the precedent for the FCC to arbitrarily subdivide the spectrum market further in future auctions based on the FCC’s latest technology-mix prognostications at that time.

Big picture, it would represent a regression back towards the 1980s pre-auction period when the FCC, not competitive market auctions, decided which company got what spectrum, and how certain spectrum was allocated.

Specifically, Sprint, T-Mobile, Dish and other competitors want the FCC effectively to exclude some competitive bidders from fully participating in the associated spectrum auction rules so that Sprint et al can enjoy a “fair opportunity to acquire low band spectrum” (at a lower price) in the FCC’s upcoming incentive auction for TV broadcasters’ 600 MHz spectrum.

Tellingly, these pleaders define a “fair” auction as one that abruptly changes the most fundamental rules of spectrum auctions mid-game to ensure that they are the ones most likely to win what they want in an exceptional FCC-steered auction.

Not only are they proposing the FCC effectively pick some companies’ winners and other companies’ losers before the bidding starts, but they also want the FCC to de facto pick “optimal” wireless technology mixes between low-band vs. high-band for different companies.

From a technology perspective, it is arbitrary to draw a line between low-band <1GHz and high band >1GHz technology. There is nothing intrinsic about 1GHz to justify the boundary it draws except its clean numeric appellation. That’s because because radio spectrum is simply a continuum of the ever-shortening of radio frequency waves as one moves up the radio spectrum chart.

The spectrum bifurcation proposal is obviously an outcome-driven line drawn to contrive a market definition to cherry-pick maximal market concentration, in order to provide cover for regulatory intervention into an otherwise market-competitive auction.

At core the FCC would be picking one wireless technology attribute over another, rather than letting the marketplace decide who values what technology attribute the highest – in this particular instance: signal strength vs. signal speed.

The DOJ’s competitive logic here is that the propagation characteristics of low band spectrum are better for low-density areas and inside buildings.

What the DOJ’s arbitrary analysis misses entirely is the speed characteristics of current high-band spectrum licenses are dramatically faster than the speed characteristics of current low-band spectrum licenses. That is because licenses in the high-band generally have more contiguous megahertz amounts than low-band licenses have.

Physics largely determines that the wireless broadband speed a provider can provide a particular user, is driven by the amount of megahertz in a license, not the propagation characteristics of the spectrum.

Simply as a very general rule of thumb, the megahertz amount of a license, say 6, 10, 20 or, 100MHz, is the amount of broadband speed it can potentially provide to a customer. A low-band 6 MHz TV license intrinsically can deliver roughly 6 megabits of speed, whereas Sprint’s Clearwire, high-band, ~100 MHz license intrinsically can deliver roughly a 100 megabits of bandwidth or broadband speed.

Given the FCC’s public obsession with promoting ever-faster broadband speeds to all Americans, how could the FCC argue that slower-speed signals from smaller low-band licenses are so much more important to consumers than higher-speed signals from larger high-band licenses? Was the FCC right in the National Broadband Plan that high broadband speeds are very important to consumers, or is the DOJ right that consumers going forward want good propagation characteristics of low-band spectrum over broadband speed?

To be fair here it is not either or, consumers want both, and different users want different mixes of the two characteristics at different times at different places with different devices.

Providing ubiquitous, quality, broadband service is very complex and a difficult endeavor, especially given the very different mixes of spectrum that each competitor has.

The big takeaway here is who is better to figure out what precise mix of power and speed characteristics consumers want at what price when – private carriers who are held accountable in the marketplace every day on whether their technology and economic judgments are accurate, or government personnel who have less practical current expertise or data, and little accountability for guessing wrong on technology?

In the modern era, the complexity and speed of spectrum markets demand market-mechanisms to allocate very scarce radio spectrum initially broad-brush in auctions and secondarily in secondary markets to fine tune and optimize holdings as real world needs change.

In short, some wireless competitors and the DOJ/OSTP are pushing the FCC down a slippery slope of arbitrary and preemptive spectrum micro-management where the FCC would not only be managing overall spectrum screens, but also proposed spectrum band sub-screens, and even spectrum-technology-mix sub-screens.

The FCC should beware of the siren song that government somehow can better allocate spectrum competitive inputs than market economics and competition can.

The last time the FCC imagined it could manage competitive inputs better than competitive market forces could, the entire CLEC industry the FCC heavily-subsidized went bankrupt.

Real sustainable wireless competition depends on market economics and market-driven auctions, not government outcome-driven auctions, laden with uneconomic implicit subsidies at taxpayers’ expense.

Scott Cleland

Scott Cleland is a precursor: a proven thought leader with a long track record of industry firsts.... (read full bio)