We’ve all been there. You’re half-way through an important conversation with a loved one on your cell phone, step into an elevator inside a building, and your call drops. The explanation for why this happens can be traced back to your high school physics class. Specifically, lower frequency spectrum, like the broadcast 600 MHz spectrum, travels farther and deeper than higher spectrum frequencies. The vast majority of wireless service providers don’t have adequate access to this “low dial” spectrum.
The good news is the Federal Communications Commission (FCC) and its newly minted Chariman Tom Wheeler are in the midst of once-in-a-generation process to redo the public airwaves and help solve problems like a dropped call in an elevator. The FCC is conducting a one-time incentive auction, in which TV broadcasters will be able to sell their rights to the wireless airwaves, and cellphone providers will then purchase this converted spectrum. Not to overstate the importance of this incentive auction, but the future direction of the wireless industry is at stake.
The problem is that AT&T and Verizon control over three-fourths of this “beachfront” spectrum (not to mention over two-thirds of industry revenues), and they want to keep other cellphone carriers from getting access. The U.S. Department of Justice has noted its concern to the FCC that these two dominant carriers have huge incentives to keep competitors from buying this spectrum – so much so that AT&T and Verizon would actually pay far more than the spectrum may otherwise be valued just to block competitors. The concept of foreclosing a competitor’s opportunity to enter into the market is not a new concept. Allowing a duopoly to dominate the acquisition of spectrum, a scarce national resource, would stifle wireless competition and harm the American public.
Competitive Carrier Association (CCA) member companies – companies like Bluegrass Cellular, Cellcom, Cellular One, and more than 100 other competitive carriers – are anxious to further expand in rural America, and they need low-frequency spectrum to do so. Providing coverage over these large and less-populated expanses is often only economically possible with spectrum that can traverse these great distances. With higher-frequency spectrum, carriers have to build many more base stations (three or more times as many as with low-frequency spectrum), and they struggle to provide adequate service at an affordable price.
Meanwhile, rural deployment is only part of the story – our larger member companies also need low-frequency spectrum to provide urban, indoor service. As a former Verizon CEO has recognized, low-frequency spectrum is “the best spectrum for in-building coverage,” an increasingly important area. According to research from networking company Cisco, mobile data usage is moving indoors, with 80 percent of wireless usage occurring inside of buildings. Without low-frequency spectrum, it can be nearly impossible to provide the same quality of service in a location that now almost defines how we use cellphones. What better way to hamper competitors than to keep them from providing service where it is most important?
In the face of sound expert analysis, AT&T and Verizon have been on a campaign to label any effort to promote wireless competition as somehow self-interestedly “rigging the market.” This type of loaded rhetoric is particularly ironic coming from these two legacy monopoly carriers which were handed their original low-frequency licenses, free of charge in the monopoly era. No one is suggesting handouts this time around. Our members simply want to compete on a level playing field, with a fair opportunity to participate and win. Does anyone really believe allowing one or two carriers to purchase the entire block of 600 MHz spectrum is a good deal for the U.S. consumer?
To reiterate: the two largest carriers hold approximately 84% of all spectrum below 1 GHz. They did not buy all of it at auctions – some of it came from competitive companies they acquired and some they got for free. U.S. taxpayers are the ultimate beneficiaries of market competition in an auction of a valuable public resource. And, history shows more bidders bring more revenue to the U.S. Treasury.
Public interest groups and most of the wireless industry are united in support of promoting competition in the upcoming incentive auction. Indeed, regulators around the world agree that preventing individual carriers from hoarding low-frequency spectrum encourages competition and benefits consumers. The FCC should heed the United States Department of Justice’s advice and look to experiences of countries around the globe: prevent the two dominant wireless carriers from blocking competitors’ access to low-frequency spectrum. With so many tangible public interest benefits, supporting competition should be an easy call—even from an elevator.
Berry is the president & CEO of Competitive Carrier’s Association, an organization representing more than 100 wireless carriers, with membership stretching from national providers to niche carriers that serve some of the most rural and hard-to-reach places in the country. For more information about mobile broadband competition and the upcoming 600 MHz spectrum auction, visit http://www.mobilebroadbandcompetition.com/.