THE BLOG
05/30/2013 02:10 pm ET Updated Jul 30, 2013

For New FCC Chair, Getting Spectrum Auction Rules Right Is Critical Early Test

Alamy

When Tom Wheeler takes his new post as chairman of the FCC one of his first, and most critical, tasks will be to keep the wireless revolution going by completing plans for auctions to supply more spectrum for wireless services. And, just making the auctions happen isn't good enough. The design has to be right so that the spectrum, the invisible radio waves that make wireless work, is used as effectively as possible. But some of the rule proposals that Mr. Wheeler will find on the table once he's confirmed would be a big mistake -- with potential to boost consumers' monthly bills and hurt the economy in the bargain.

As Mr. Wheeler knows, wireless communications is one of the economy's strongest drivers. The evidence is all around -- people vigorously tapping on their smartphone, reading a tablet device, or ducking into a coffee bar with a laptop under their arm. Fierce competition to sign up customers for wireless service or to create the next breakthrough device is stimulating billions in investment and creating jobs. Wireless also adds tens of billions of "consumer surplus," an economists' measure of the value consumers get from goods and services. Wireless is the proverbial goose that lays a golden egg -- again, and again, and again.

Wireless is especially critical for communities on the margins -- including poor and working poor families, and many families of color -- enabling them to reach the Internet with affordable technology that fits their budget and lifestyle, making up for lagging ownership of desktop computers and Internet connections to their homes. According to March 2013 data from the Pew Hispanic Center, more than three-quarters of Latinos access the Internet with a mobile device, compared to about 60 percent of white Americans.

But the benefits of wireless are dependent on a big enough supply of spectrum to meet skyrocketing demand. Unless Mr. Wheeler and his new colleagues at the FCC can put more of it to work for wireless, substantial Internet traffic jams loom for mobile devices. Wireless phone calls will drop, downloads will freeze, our favorite apps won't work as they should. At times, our mobile devices won't connect to the Internet at all. That's bad news for every American who relies on wireless connectivity, but especially for those for whom it's often the only way for getting online.

A recent study from the Georgetown Center for Business and Public Policy argues proposals to bar America's most popular wireless service providers from dual auctions to reallocate spectrum from broadcast TV to wireless services would mean higher prices for wireless service and make it too costly for many Americans to adopt 4G technology. Not only could prices go up, boosting monthly bills by about 9 percent, but the study says such discriminatory rules would mean less new spectrum than auctions in which all companies can bid equally. As a result, America's growing spectrum deficit would go up instead of down and service would deteriorate.

The FCC hopes the auctions will mean as much as 120 MHz more for wireless. But the Georgetown study says the auctions' proceeds would be trimmed about 40 percent (perhaps $12 billion), significantly reducing the amount of spectrum acquired from broadcasters and repurposed for wireless if the two most efficient carriers can't participate.

Spectrum policy must meet users' quickly growing need for airwaves -- while balancing real considerations for diversity of ownership and MWBE business opportunity, as smartly advocated by the Minority Media & Telecommunications Council (MMTC). But mistakes in spectrum policy-like proscribing certain players from auctions to advance notions of competition, could backfire, dampening overall economic growth. According to the Georgetown paper, by slowing the switch to advanced 4G, the higher prices would cost about 118,000 jobs that would be created by the adoption of better technology.

Putting spectrum to its most productive use is the best way to serve consumers, especially Hispanics and others for whom wireless is a critical gateway to jobs, education, and other life-enriching experiences. But proposed bidding limits would do the opposite -- blocking resources from the most efficient operators, adding to the spectrum deficit, raising prices for consumers, slowing the move to 4G, and stunting job growth.

No doubt, Mr. Wheeler will aim to create "win-wins" at the FCC. But poor spectrum auction rules would be lose, lose, lose.

Jason A. Llorenz, Esq. Is Senior Fellow, LIN@R at Rutgers University School of Communication and Information Studies; he is also Director of Innovation Policy for LIN@R. Follow him on Twitter @llorenzesq and follow LIN@R technology tweets @LINAR_technolog.