THE BLOG
05/22/2013 05:54 pm ET | Updated Jul 22, 2013

Upcoming Auctions Key to Wireless Internet Future

This year, government will make key decisions which could positively impact how we use our smartphones to communicate, conduct business, get directions, engage in social networking, listen to music and watch videos. These key government decisions could determine what kind of choices we'll have for mobile connections -- and what they will cost.

The FCC, a government agency, is going to be gathering broadcast spectrum from willing TV stations around the country and auctioning it next year to mobile phone companies to use for wireless Internet access. Consumers and many in the tech industry want to make sure the FCC structures the auction to encourage competition among carriers so consumers get lower prices and better service.

Spectrum is the oxygen that all wireless carriers need 24/7 to operate their networks and to serve customers. Blocks of frequencies within the electromagnetic spectrum are the wireless transmission medium between mobile devices and "cell" towers. This spectrum covered in the upcoming auction is critical and valuable because it can cover rural areas with less infrastructure and go through buildings. This auction is the biggest opportunity to meet the growing demand for spectrum in the foreseeable future.

For the last decade, FCC policy and rules have been explicitly designed to promote a competitive wireless market and prevented any one carrier from amassing licenses for more than one third of total mobile spectrum.

In the mobile wireless business today however, the largest two carriers, AT&T and Verizon, control 78 percent of high quality "low band" mobile spectrum. This level of control began back in the 1980s when direct spectrum assignments were made to telephone companies operating in the government-structured duopoly cellular markets of that era. Cell frequency blocks were first licensed by metropolitan areas, which is why rural coverage was slow to arrive.

In the 1990s, the FCC conducted pro-competitive auctions of mobile spectrum that broke open the geographic wireless duopolies. However, less than 10 years later, industry consolidation became the norm, and another spectrum auction in 2008 resulted in a sweep of valuable 700MHz spectrum by AT&T and Verizon.

Even though Verizon and AT&T already have a dominant position, we do have some competition in the wireless market, which has enabled consumers to have options like unlimited data plans, portable devices and smartphones without contracts. But to continue to produce innovative choices for consumers, smaller carriers need to be able to successfully bid and get access to this low band spectrum up for auction.

Some would certainly question why the government must be involved at all. The reason is that the auction involves a limited public resource -- broadcast spectrum. Unlike landline broadband, which may be deployed wherever a company agrees to make the investment (in coordination with local governments) in new fiber optic cables, such as in Lafayette, LA, Kansas City, Chattanooga TN and now planned in Austin TX, Provo UT and Seattle, wireless competitors must have permission to use spectrum resources. It is licensed by the federal government as a basic raw material. As long as there will be a government auction, it should be a fair one, which ensures the public interest is protected.

Access to superior quality low band spectrum below 1G is a critical competitively significant factor recognized by the Antitrust Division of the Justice Department.

The tech industry would like to see clear limits on the amount of premium mobile spectrum that may be licensed to any one company, and rules that will allow all companies to compete for some, but not necessarily all of the auctioned spectrum.

Part of the preparation for the incentive auction is a comprehensive FCC review and overhaul of its outdated spectrum holdings limits. This review and reasonable competition-focused rules will provide greater predictability for all bidders and an opportunity for smaller companies to secure at least some additional spectrum so that they can continue to offer us innovative choices for smartphone service.