“All Spectrum is not Created Equal”
By: Lexi Herman
Nowadays, we use smartphones for everything; from making a phone call, sending and receiving messages, to web browsing. Smartphones are even used for flashlights and alarm clocks. However, as consumers, most of us do not understand what it takes to use the technology in our wireless devices. It is not as simple as clicking on Safari or Facebook and, like magic, a whole virtual world lies before us. One part is especially overlooked; telecommunication companies are dealing with increasingly complex legislation to produce the virtual world that we, as consumers, have come to heavily rely on.
Competition in Telecommunications
Congress’ passage of the Telecommunications Act of 1996 changed the face of the telecommunications industry into a competitive one. Since then, the Federal Communications Commission (“FCC”) has supported the view that competition is generally the best means of ensuring that wireless customers receive affordable, high-quality products and services with choice as to their provider and continuing innovation.
However, the competition the FCC and the Telecommunications Act intended is in jeopardy. Today, AT&T and Verizon have almost 75% of the existing low-band spectrum leaving the smaller nationwide and regional carriers with little to none. Wireless spectrum, for those who may not know, is comprised of electromagnetic radiation and frequency bands which are used at different levels for different purposes and geographic areas. This spectrum is critical to wireless companies because it has real world consequences. The low-band spectrum is what allows consumers to receive that call from a prospective employer or get in touch with emergency services.
Spectrum Reserve
Spectrum is part of what keeps the wireless industry competitive. The FCC is concerned if the dominant wireless companies acquire more of this low-band spectrum, they will foreclose any competition by smaller nationwide carriers. To resolve their concern, the FCC created the spectrum reserve which consists of 30 megahertz (“MHz”) of low-band spectrum. This reserve is a way for the FCC to meet their goal of improving wireless service, and ensure all Americans have access to reliable wireless networks. But, the question remains: Is the reserve large enough to have any meaningful impact.
In order to have a meaningful impact, the reserve must preserve rivalry and prevent market power to ensure the industry continues to be competitive to the benefit of customers. Without a reserve large enough to do this, AT&T and Verizon could continue to dominate. This could lead to consumers paying higher prices without improving the quality of service and diminishing innovation.
Broadcast Incentive Auction
The Broadcast Incentive Auction (“BIA”) is another way the FCC is trying to keep the wireless industry competitive. The idea behind the incentive auction is to repurpose unwanted or unused spectrum by having licensees relinquish it to the FCC in exchange for a portion of the auctions proceeds.
This auction, (scheduled to take place in early 2016), will offer a low-band, 600 MHz spectrum which smaller nationwide carriers, like T-Mobile and Sprint, require to stay competitive. This low-band spectrum provides better in-building coverage. With 80% of wireless consumers using their devices indoors, this is a hot and sought after commodity.
Finally, this auction is paramount because it is the first to take place in several decades. It also may be the last to occur for some time. Therefore, it could make a significant difference in how competitive the telecommunications industry is in the future. This is especially true because AT&T and Verizon have every reason to foreclose on smaller nationwide and regional carriers. Currently, AT&T and Verizon do not seem to be too concerned with competing price-wise with smaller carriers. They can do this because smaller carriers do not have the same coverage they do. Consequently, there is no need for them to lower their prices. However, the danger to the larger carriers lies with smaller carriers increasing their coverage. If smaller nationwide and regional companies successfully bid on this spectrum, then AT&T and Verizon have lost the last advantage they have.
Save Wireless Choice
T-Mobile and Sprint, along with a number of other associations (including Rural Broadband Association, Competitive Carriers Association and Public Knowledge), regional carriers (Blue Wireless and Union Wireless among others), and members of the U.S. Senate, believe in order for the reserve to have any meaningful impact it has to be increased from its current 30 MHz to at least 40 MHz. These groups argue that at 30 MHz the reserve only allows one other nationwide wireless provider to compete with the “duopoly” known as AT&T and Verizon. This, T-Mobile argues, stunts competition causing consumers to suffer. However, if the reserve was increased to 40 MHz then two, possibly three, other carriers could compete with AT&T and Verizon on a larger scale.
It seems contradictory that the FCC might decline to increase the reserve to 40 MHz. They have continually prevented mergers between 2 national carriers (i.e. T-Mobile and Sprint and T-Mobile and AT&T) because they want to ensure the continuation of competition with 4 nationwide wireless companies, but without an increase in the reserve this may not happen.
Another constituency which favors an increase in the broadband reserve are members of the United States House of Representatives and the Senate. They believe that an increase to the reserve is crucial to protect competition and innovation. Lawmakers have also noted that expanding access to wireless broadband is a “proven job creator and economic stimulant”.
Finally, and perhaps most importantly, nearly 5,000 consumers to date have raised their voices demanding that the FCC save wireless choice. Hundreds of letters have flooded the FCC’s website everyday accusing AT&T and Verizon of trying to delay the auction to keep their strangle hold on wireless. It is clear that wireless consumers want what the FCC promised them in 1996: a competitive wireless landscape. Consumers believe this means a landscape that benefits them in terms of pricing, innovation and services, not one that limits consumer choice.
The importance of the size of the reserve comes from the fact that at the BIA, the FCC will be auctioning off the spectrum in blocks – either 5x5 or 10x10. To put it simply, a 30 MHz reserve allows only one non-dominant carrier to acquire a 10x10 MHz channel. This 10x10 block, for a total of 20 MHz, is necessary for successful coverage deployment and tremendously important for LTE coverage. While 5x5 will do the job, as any engineer will tell you, the 10x10 MHz block is what is really needed in order for customers to get great service and receive all the benefits LTE has to offer.
This auction is important for rural America. Currently, as noted by Senator Angus King (I-Maine) and Mark Warner (D-Va.) in their letter to the FCC, only 40% of residents in rural areas have a choice in their wireless broadband providers. In addition, one-fifth of them have limited coverage. Smaller companies who have a winning bid on this 600 MHz low-band spectrum could change the lack of providers and limited coverage. This spectrum covers a wider geographic area with fewer transmitters. This will allow providers who place a winning bid the ability to deploy wireless coverage in underserved areas. In addition, companies with winning bids will be required to build out the spectrum. Within 6 years, it must reach 40% of the people living in that service area. Within 12 years, they much reach 75% of the people. That means more coverage, better quality coverage and more competition and, hopefully, lower prices for rural America.
Take Action
Those who are interested in increasing the spectrum reserve to help preserve competition in the wireless industry can visit SaveWirelessChoice.com. Just click on the “Take Action” button and fill in your information, and a letter will be sent on your behalf to the FCC asking the Commission to keep their trajectory and hold the auction as planned in early 2016.