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Spectrum Crisis: Wireless Auctions Preferred Method

Leonard Grace

Talk, conjecture and analysis have predicted a wireless spectrum crisis for years. The official word seems to project a culmination of dropped calls, slow loading of data, downright network access denials as impending by 2015. If so, then we should look at the current argument about how that additional spectrum can be disseminated to wireless carriers in a fair and balanced fashion. Public auctions are a preferred method, in my opinion, since they neither favor, nor impede any wireless carrier.

Mergers to Gain Spectrum

Conspicuously, companies have been plotting and formulating a way to gain additional spectrum through buy-outs or mergers to gain market dominance, or nicely put, a competitive edge since the AT&T/T-Mobile acquisition. But have these companies focused on good business dynamics in doing so, or have they been caught off-guard in predicting eventual spectrum depletion forcing a merger or acquisition to alleviate the problem? I say the latter and it smacks of bad market decisions that result in less competitiveness in the market if left unchecked. Fortunately, the FCC has been able to see through the smoke and mirrors to block such tactics.

Auctions are fair and unbiased

So, why have spectrum auctions? The fact is that having a public auction to sell addition spectrum is a market friendly and competitive answer to each wireless carrier needs. Instead of allowing companies to gobble up a scarce resource as they see fit; large companies merging with those having existing inventories, therefore creating less competition increased market dominance, is a recipe for disaster. Each wireless carrier, large or small, should have an equal chance to bid at an auction. This allows for possible partnerships for smaller bidders which could offset the dominance of large companies. In essence, fair and balanced. See (Genachowski: Auction Bill Could Limit Benefits of Spectrum Recovery)

Wireless Tiering: Profit based, not spectrum based

Those who cry foul on alliances which have been curtailed, as the FCC and DOJ have done in the past; those that potentially hurt smaller competitors, should come clean about their own alliances behind such rhetoric. Wireless companies have begun creating tiers which charge heavy users more for bandwidth usage than those who use a fraction of that amount. This is a normal progression of market dynamics indicating that more usage relates to higher monthly bills. Cisco has been promoting this concept for years that operators should be tiering to increase profits. So, wireless companies should not be confusing the reasons for tiering and/or throttling as being spectrum based rather than profit based. See (Spectrum crunch: all talk, no action, and consumers suffer)

Auction Spectrum: sooner rather than later

The FCC should move forward with spectrum auctions. This issue has been debated long enough and most of us are aware more is needed with the projected growth of wireless devices and applications. Simply put, auctions are the fair and reliable way to promote a continued competitive wireless market.

By Leonard Grace, Founder & Editor - Broadband Convergent

Related topics: Broadband, Policy & Regulation, Telecom, White Space, Wireless

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Comments

Free Market vs. Free market Phil Howard  –  Feb 21, 2012 8:47 AM PDT

One thing I want to see be avoided in spectrum auctions is that this "back end market" of buying spectrum does not end up damaging the "front end market" of selling services based on that spectrum.  If one company gets too much of the spectrum, it can harm the public through abusive business tactics in selling those services in ways that are much harder to enforce.

We certainly do need more spectrum.  But we also need more space ... in the data occupancy sense.  Smaller cell sizes makes better use of spectrum, in general.  But there's a cost to smaller cell sizes and business likes to avoid cost.  If they see buying spectrum as cheaper than making better use of spectrum, they will favor that direction.  OTOH, that does make the services offered come at a lower cost.  Ordinarily that should be something for the free market to work out.  But the spectrum itself is too finite to let that be worked out in ways that impede competition.  I believe we need to manage this free market on the back end to ensure a thriving free market on the front end.

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