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This article was published on September 29, 2012

The FCC has agreed to review its spectrum rules: Here’s what you need to know

The FCC has agreed to review its spectrum rules: Here’s what you need to know
Alex Wilhelm
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Alex Wilhelm

Alex Wilhelm is a San Francisco-based writer. You can find Alex on Twitter, and on Facebook. You can reach Alex via email at [email protected] Alex Wilhelm is a San Francisco-based writer. You can find Alex on Twitter, and on Facebook. You can reach Alex via email at [email protected]

Today the Federal Communications Commission (FCC) agreed to review its regulatory policies regarding how much spectrum any single wireless carrier can own.

Known as the ‘spectrum screen,’ current rules potentially limit the ability for any mobile provider to pick up enough spectrum to push out other players; there is a finite amount of the stuff, so who controls it matters in a real way. If there isn’t a sufficient quantity left to launch a new wireless network, too bad.

The other side of the coin is that due to rising mobile data usage, spectrum is both expensive and in demand. To that end, the FCC also today announced that it will auction off spectrum voluntarily sold by television companies to wireless providers. That specific auction is expected to raise as much as $15 billion, and provide more total ‘bandwidth’ to carriers who want to pony up the cash.

The FCC’s decision to review the spectrum screen is thus far without direction. As The Hill notes: “The commission could tighten the restrictions, loosen them or leave them the same.” Thus, we must run to the room of spin and hear the arguments in both directions. Let’s go!

Don’t regulate me, bro

There is analysis over on Forbes concerning this issue that is both topical and well written. It’s author, Hal Singer, points out that setting an artificial cap on how much spectrum a single company can control in effects places a ceiling on how many providers can exist:

A spectrum cap equal to one-fifth of all spectrum implies that the ideal market structure is five national carriers.

Putting that figure in mind, Verizon controls about 18% of all spectrum right now, so a 20% cap would put it right up against the upper limit. However, if an ultimate cap isn’t the best way to go about things, how do we prevent the Big Players from easing out any hopes of a little upstart getting into the game? Hal has a fun idea:

The market should decide whether the optimal number of wireless carriers is three or four or five, not the regulators. If the FCC is worried about a single carrier buying up the entirety of the spectrum in the forthcoming broadcast spectrum auction, then a simple rule forbidding such an outcome in that auction is more efficacious than a clumsy spectrum cap.

What’s very interesting about that idea is that it won’t drastically lower demand for spectrum, and therefore won’t harm the price of that signal variety. That is a fear right now, that limiting the amount of spectrum a company can hold will cut down on revenues from the coming auction.

As BroadcastingCable reports:

While FCC chairman Julius Genachowski said it was a needed review, there was major pushback from Republican commissioners, concerned that any tightening of that screen or capping of holdings or move away from the current case-by-case determination could negatively affect participation in the broadcast spectrum incentive auction.

Could the compromise be a good fit? Perhaps, but there are those who want to move in the other direction, and limit how much total pie any one player can slice of for themselves.

Don’t be all anticompetitive, bro

Analysis over on Fierce Wireless takes to task the idea of a short-term spectrum crunch, noting that major players have indicated that recent purchases have them set for the next few years. This directly implies that things are safe for some time to come.

Building off of that, the report pivots to what small players think of the current situation:

[R]ecent actions by the nation’s Tier 1 seem to indicate there are readily available (if expensive) ways for them to meet their medium-term spectrum needs. However, this picture ignores the fact that smaller carriers with less resources are still searching for more spectrum and, judging by the stance of the Competitive Carriers Association, they are clearly worried about the likes of AT&T getting their hands on even more spectrum.

The Competitive Carriers Association has a very sharp-toothed take on the idea of allowing AT&T and Verizon to buy as much spectrum as they wish, at prices they essentially set as they have much larger bank accounts to work with:

Allowing the largest carriers to obtain unlimited amounts of  spectrum on the secondary market raises serious competitive concerns. […] The only way for the FCC to truly see the devastating consequences of further spectrum aggregation is by consolidating the proposed applications. On their own, AT&T’s proposed license acquisitions may not seem significant, but when added together, it totals to a significant amount of spectrum.

The argument is thus somewhat simple: Larger carriers will eventually need more spectrum as mobile data usage grows. At the same time, space must be left in the market for smaller players to emerge, and if major players can snap up sufficient spectrum, that avenue to competition could be extinguished.

What the FCC ends up doing, if anything, will evolve in the coming months. TNW will keep you informed.

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