Wireless spectrum auction presents unique opportunity, says FCC’s Martin

The Federal Communications Commission (FCC) will soon finalize its rules for the 700 Megahertz (MHz) auction, the last big slice of premium wireless spectrum the agency is likely to put on the block for years. The sale, which must take place before Jan. 28, is expected to raise billions for the Treasury and has attracted the heated interest of Internet and telecom giants, the public-safety community and public interest groups.

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FCC Chairman Kevin Martin favors a rule subjecting roughly one-third of the spectrum to an “open access” condition, a term he says means consumers can attach any device to the network deployed on the spectrum and download any application from the network. Most large incumbent wireless operators claim such a rule would reduce their bids.
Meanwhile, Google and other Internet companies complain that Martin does not go far enough, arguing the FCC ought to require winning bidders to lease spectrum to other companies. Martin recently talked to The Hill.

Q: If you think open access is such a good idea, why not impose it on all the spectrum that will be auctioned?

A: I think that this auction gives us a unique opportunity to set aside a significant amount of spectrum and have this different kind of open-platform. But it would still allow for two-thirds of the spectrum to be auctioned off in the same way we always have to allow for the current providers to buy that spectrum and integrate it into their current services without having to change their whole business model. I think it’s a fair way to carve out a piece of spectrum as an area, an opportunity, for experimenting to see if this would create a different kind of dynamic and more open platform.

Q: Since the spectrum has finite capacity, how do you envision open access working without clogging up the network?

A: The network operator is going to be able to charge the consumers what they want for the different amounts of capacity they’re using up. They’re still going to be able to manage their networks, they’re just not going to be able to exclude different devices or applications the consumers may want to use.

Q: There are two mobile phone standards in the U.S. You say that with an open access requirement, consumers will be able to use any device on the network. How do you envision the requirement being implemented from a technical perspective?

A: Certainly, you can have phones that are dual-mode and operate on multiple kinds of networks. But what we’re requiring is that, if a handset is capable of working on a piece of spectrum, and whatever network is deployed on this piece of spectrum, then the network itself has to accept those devices and it has to unlock its network.

Q: You favor setting aside 10 MHz of the spectrum for a national public-safety network. The winning bidder would build the network and have access to the capacity not being used by the public-safety community as long as it relinquishes the spectrum to first responders during an emergency. How do you balance this and still give the private sector the incentive to bid on this spectrum and build this network?

A: I think it could be a win-win for both the commercial provider and the public-safety community. We’ve tried to put forth a plan that’s very similar to what public safety has advocated to ensure their communications are prioritized and protected. They’ve recognized that they have to pay [to use the network]. Being able to coordinate will be a requirement. To the extent that these two entities, public safety and this commercial entity, have any details of their agreement that they can’t work out and negotiate, the commission would act as an arbitrator.

Q: The auction could generate up to $20 billion for the Treasury. Some argue that if you put too many constraints on the use of the spectrum, you will depress interest in the auction and ultimately reduce the proceeds. Are you concerned about these budget issues?

A: I think it’s important to make sure that the government gets a fair return for the spectrum in this auction, and that’s why we’ve set a very high reserve price. The commission looked at how much money we raised in the most recent auction for a similar kind of spectrum. And we set a minimum floor that needs to be raised that was equal to the most anyone was willing to pay in the last auction. I think that’s a fair way to make sure that the public’s interest in getting a fair return on this spectrum is addressed.

Q: There’s been some criticism on Capitol Hill of a proposed temporary cap on federal subsidies to wireless providers.  You indicated previously that you favor the cap as a way to rein in the growth of the Universal Services Fund (USF). Has your thinking changed on that?

A: I’m going to be supportive of any of the measures to try to contain the growth of the fund because I think that it’s important to contain the growth of the fund to protect the [ability of] people who live in rural areas … to continue to be connected. I believe the right long-term answer is moving to a reverse auction methodology and I will continue to advocate that. But I think that we’ve got to do something in the interim to control the growth of the fund.

Q: There has been an open proceeding for several years on how to modify the contributions to the USF. What is the status of that?

A: A year ago, the commission took some important steps to help stabilize the fund. We broadened the base of people who would contribute so that these new technologies, like voice-over-Internet-protocol, had to contribute to the fund. And that was a significant change.

I still believe that over the long run, the commission should move to a number-based contribution methodology where people contribute to universal service based upon an assessment of the telephone numbers. The telephone numbers are an important government resource. The federal government is in control of those. We could assign a value to them and that value can support the Universal Services Fund. I think that is a good, technologically neutral way to collect universal service fees.

Q: The U.S. ranks behind several developed countries on broadband penetration. What are we doing wrong and what are we doing right to deploy broadband more quickly?

A: I think it’s important to take into account that we have a very large area with more rural populations than other countries. When you disaggregate some of that data, you see we aren’t so far off. Massachusetts has about the same population density as Japan, and they have about the same broadband deployment.

We’ve tried to facilitate an environment that provides for competition between the different network providers that provide competing broadband services today. We’ve removed regulations that might impede their ability to compete so that we’ve got a more competitive environment between DSL providers and cable modem providers, and that competition has led to increased investment and increased deployment of broadband services. And we’re looking at how we can structure the upcoming 700 MHz auction so that we can facilitate additional broadband competition and additional innovation in broadband services.

Q: There were rumors that you were going to hold an en banc hearing before the commission on the early termination fees charged to cell phone users. What’s the status of that?

A: We’re trying to hold a hearing on early termination fees that apply not only to the wireless industry but that also apply increasingly to some of these other kinds of service, whether it’s a bundled package of voice, video and data that different companies are offering as well. I think this is an issue that actually cuts across different technologies. I would like to have the commission hold a hearing so people can come talk about what’s going on.

Q: Are you going to stay through the end of the Bush administration?

A: I don’t have any plans of going anywhere. Knock on wood, I hope so.

Q: Throughout your tenure as chairman, there’s been buzz that you’re going to run for public office. Is there any truth to that speculation?

A: I don’t have any plans other than that I’m going to stay here at the commission and try to work on the issues.