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There is nothing market-based about incentive auctions

Posted September 28th, 2012 in Broadband, FCC, Government Regulation, spectrum, spectrum auction and tagged , , by Alton Drew

On 28 September 2012, the Federal Communications Commission announced the opening of a rule making proceeding that will implement procedures for the spectrum incentive auctions described in sections 6402 and 6403 of the Jobs Act. The FCC describes the incentive auctions as market-based, but based on the law itself, I can see nothing market-based about these auctions.

For one thing there are the false signals that will be sent from a mandated reverse auction. The reverse auction gives broadcast TV license holders a chance to announce the prices at which they may be willing to let their broadcast spectrum be made available at. The spectrum will then be made available for competitive bidding by wireless carriers.

This is where I have a problem with Congress and the law. The reverse auction sends the market for spectrum licenses the wrong signals. Once a carrier engages the FCC in a competitive bid for spectrum, there will be a risk of overbidding for the precious resource. There is nothing in the law that says the competitive bidding price offered by a wireless carrier should not be allowed to exceed the price sought by the TV broadcaster.

The only way to claim a market-based bidding process is to allow wireless carrier and TV broadcaster to communicate and negotiate a price for selling and acquiring spectrum. Congress and the FCC should not run the risk of inefficient prices eventually sliding into consumer prices.

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FCC asserts social policy of strategic bandwidth advantage but no clear public policy for getting there

Posted September 26th, 2012 in Broadband, FCC, Government Regulation, spectrum and tagged , , , by Alton Drew

I define social policy as the goal society wants to meet. It’s a state of mind. Public policy is the action that government takes to get society to that desired point. Federal Communications Commission Chairman Julius Genachowski’s speech at VOX Media’s headquarters showed that the FCC does not a command of the definitions.

Mr. Genachowski presented what appears to be a social policy for where America needs to be going in order to ensure and continue our dominance in broadband. He termed this social policy, “strategic bandwidth advantage”. While laying out the three pillars upon which it is supposed to stand; broadband speed, capacity, and ubiquity, Mr. Genachowski never quite said what strategic bandwidth advantage is supposed to be.

In fairness Mr. Genachowski did lay out where America stands with current broadband capability and capacity. On a going forward basis Mr. Genachowski didn’t really say how this new goal of strategic bandwidth advantage differs from our current national broadband plan. At times it sounded like Mr.Genachowski was relegating the NBP to a tactical position versus the ultimate goal.

Mr. Genachowski’s new goal needs to be fleshed out. If bandwidth advantage is literally about widening the digital highway, then America will need more than lip service from the FCC about a continued light touch regulatory approach. The FCC will have to abandon legacy monopoly style regulations that barely worked in the 1980s; policies that definitely are not applicable today.

The FCC and the Obama Administration will also have to lay out clear goals for broadband. Its vision will have to be clearer and make a detailed presentation of the policy tools it plans to use going forward. This includes clearer signals as to what its policy tools are going to be. This will go a long way to eradicating regulatory uncertainty.

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Orange County hasn’t made its interference case against wireless carriers

Posted September 26th, 2012 in AT&T, Broadband, FCC, Government Regulation, spectrum, Sprint and tagged , , , , , by Alton Drew

The Orange County, California Sheriff’s Department would like the Federal Communications Commission to reconsider its order that provided spectrum management flexibility in the 800MHz band. Orange County argues that authorizing early testing and deployment of wideband CDMA in the non-reconfigured portion of the 800MHz band has caused interference with their public safety communications.

CDMA refers to Code Division Multiple Access, a mobile phone technology that uses code on the receiver’s end to separate out the calls. A newer version called wideband CDMA or 3G GSM requires wider channels and carries more data, and that is the policy dilemma.

The FCC’s intent behind its Report and Order in Docket Nos. 11-110 and 12-64 was to allow wireless carriers to introduce more advanced wideband technologies on their licensed spectrum where there was little risk to public safety operations. The FCC issued the order in expectation that licensees introduce CDMA and LTE technologies while incurring additional compliance costs.

The introduction and evident demand for the new iPhone serves to validate the FCC’s policy position. The demand for new, innovative technology continues to grow. Commercial carriers must continue to seek out additional spectrum to manage consumer needs. Allowing flexibility in channelization allows wireless carriers to meet that ongoing goal.

In addition to policy, Orange County did not explicit show where current rules on interference were violated. For example, FCC rule 90.672 spells out specific requirements for a showing of unacceptable interference in the 800MHz band. Orange County fails to assert that the requirements under Rule 90.672 were met.

Also FCC rule 90.673 spells out a wireless carrier’s obligation to abate interference. Orange County has not clearly asserted that AT&T failed to abate the interference in a timely and practicable manner, although it gives Sprint credit for doing so. How much of a difference Sprint’s CDMA vs. AT&T’s GSM configurations play in abatement efforts is not discussed in Orange County’s complaint.

From a policy perspective, reconsidering the Report and Order only sets back efforts to meet the increasing consumer demand for spectrum. The FCC should require both AT&T and Orange County to work through the FCC’s resolution procedures or otherwise negotiate some solution to the problem short of amending the order.

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Will the FCC have another mega merger to consider?

The Internet is blowing up not only with news of the sale of Apple’s iPhone 5, but also with the speculation that Sprint may be considering a little mischief in the mergers and acquisitions arena. One commentary on Seeking Alpha reports that Sprint CEO Dan Hesse may be considering buying a smaller carrier after the build-out of the company’s 4G LTE network.

Who might be the potential buys? They may include MetroPCS, Leap Wireless, or U.S. Cellular. Of course this is all speculation, but should Sprint make a move to purchase one of these carriers, I would hope that the Federal Communications Commission and the United States Department of Justice would have the good economic sense to let this merger go through.

First, such a move would satisfy the FCC’s alleged preference for competition and the benefits it brings to the consumer. An enlarged Sprint could reach more consumers and with the increased economies of scale, they would be able to serve those consumers at lower costs than with its current network.

Second, with a company like Leap Wireless in its portfolio, Sprint can not only continue providing unlimited data plans to consumers, but has another brand that can extend wireless broadband services into lower income markets. These would mean more consumers adopting wireless broadband and enjoying its benefits of connectivity.

Third, the FCC need not worry about a duopoly remaining in the wireless market after the transaction is completed. Sprint may end up a stronger third alternative to AT&T and Verizon.

But hey; what about T-Mobile? T-Mobile may be out of play simply because T-Mobile runs on a GSM network while Sprint CDMA network. Why incur the additional expense converting T-Mobile over to Sprint’s network when U.S. Cellular, MetroPCS, and Leap Wireless run on CDMA.

Finally, there is no reason for government interference in the making of a market in such an instance. Wireless carriers have naturally been expressing demand for spectrum especially since the introduction of the iPhone In 2007 began the onslaught on spectrum we see today.

Oh well, we’ll stay tuned.

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Comparing Romney to Obama on potential broadband policy

Posted September 20th, 2012 in Broadband, Election 2012, FCC, Government Regulation, Mitt Romney, net neutrality, Obama and tagged , , , by Alton Drew

Last week the Innovation Technology and Information Foundation released a report comparing the expected policies and platforms of President Barack Obama, Governor Mitt Romney, and the Republican and Democratic parties in a number of areas including broadband, special access, and spectrum. Here is a summation of the findings in the report.

On broadband, specifically a digital infrastructure, President Obama has promoted a robust wireless and wireline broadband infrastructure capable of supporting an enhanced electrical grid, health care, and education. The Romney campaign has not articulated a position on the nation’s digital infrastructure.

The Obama Administration would like to see high-speed wireless capability within reach of 98% of Americans. The Romney campaign has not taken a position on expanding high-speed wireless access, but current FCC members agree with Democrats on the issue of modernizing the Universal Service Fund mechanism to support access to broadband.

In the area of special access, the Democratic majority on the FCC supports suspending deregulation of special access, while Republicans want to see deregulation continued.

Republicans and Democrats agree that the USF should be modernized so that rural and underserved households receive greater access to broadband services.

Republicans are opposed to the FCC’s net neutrality rules that were imposed in December 2010. Democrats, including the President, have been steadfast about removing the rules. While Democrats would like to see net neutrality rules not applied to wireless services, Republicans want the same forbearance for both broadband wireline and wireless services.

Can we really say we see any surprises?