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Simple Rules Will Ensure Auction Success, Consumer Benefits

BY: TOM GURR

Next time you’re out in public, take a good look around. I see the tops of heads as much as I see faces – many are gazing down into the device in their hands. The speed at which wireless innovations have become indispensable is astonishing because the technology evolves even while our dependence on it is increasingly commonplace. Face it, we’re hooked. No matter where we are, we want the reliable speeds and coverage we need to support the wireless services we depend on.

Of course, as mobile technologies have advanced, consumer demand for wireless broadband has exploded. Here in Washington, the mobile tech sector has become a driving force in our economy, accounting for about 50,000 jobs and $2.5 billion in economic activity.

Exponential growth in this industry weighs heavily on wireless networks throughout the country, and as a result, some users experience degraded service, including slower speeds. That’s where the upcoming spectrum auction comes in. The Federal Communications Commission is finalizing rules for an auction that, if done right, should make more spectrum available for wireless consumers.

Wireless carriers need more spectrum so that they can build out high-capacity and expanded mobile networks across the country. These valuable spectrum airwaves are in limited supply but the incentive auction is an opportunity for television broadcasters to sell their spectrum holdings at auction. As part of the auction process, wireless carriers are supposed to be able to compete to obtain the airwaves they need to serve their customers. That’s how it’s supposed to work.

This is a complex auction, because although the primary purpose is to get underused spectrum from broadcasters to wireless carriers – that’s not the only purpose. Auction proceeds will be used to reimburse broadcasters as well as for deficit reduction and for the funding of FirstNet, a nationwide public safety broadband network (although recommended a decade ago by the 9/11 Commission, this network has not yet been built because of its cost). So, the ideal approach is one that gives broadcasters incentive to make their spectrum available for sale, generates the maximum amount of revenue possible, and ensures the process encourages participation from all bidders, which ultimately benefits more consumers.

Unfortunately, some leaders at the FCC have proposed bidding restrictions that would favor some carriers over others, and have a chilling effect on the benefits of a more open process. Only fair and open bidding that allows all carriers to compete equally for the spectrum they need will result in the greatest consumer benefit and the highest possible revenue; in other words, making this auction a success.

One of the reasons the FCC stated they want to favor some carriers is to allow for greater rural coverage in America. Of course this is critically important. The benefits of broadband – including wireless broadband – can boost economies, improve health care and deliver educational resources typically more easily accessed in urban environments. But any limitations on the process runs the risk of limiting these benefits for consumers. Dr. Anna-Maria Kovacs, a telecom industry analyst at Georgetown University, just released a new analysis of this issue and concluded that “by limiting the additional low-band spectrum that can be bought by those two national carriers who actually serve rural America in the hope that the other two national carriers will enter those markets, the FCC is more likely to harm than help rural consumers.”

Furthermore, broadcasters hold all the cards. If they believe that they might not get top dollar for their valuable resource, they might quite reasonably decide not to participate in the auction at all. In fact, if implemented, the FCC’s proposed restrictions could mean a 40 percent reduction in auction revenues, a difference of about $12 billion.

If the primary purpose of the auction is to get more spectrum to the marketplace, then bidding limits that actively discourage broadcaster participation would certainly work against that goal. And in the end the losers would be FirstNet, which wouldn’t get the funding it needs, the wireless economy, which needs the oxygen provided by spectrum to innovate and grow and most critically, consumers, who have been empowered with more choice and opportunity at home and at work because of robust wireless services.

Consumers—whether urban, suburban, or rural—win when regulations encourage competition, innovation, and private investment. We’ve seen firsthand what innovation and investment can do in Washington. We got 50,000 new jobs and $2.5 billion in economic impact (and growing) to prove it. Obfuscating a complex auction process by trying to manage outcomes that advantage one group at the expense of others, will lead to limitations for everyone. Fair and open auction rules will produce real competition, leading to expanded access and more options for consumers across the country.

Categories Articles, Blog, Featured Story, Spectrum, Wireless Explosion | Tags: | Posted on May 14, 2014

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