CNN started a weeklong series today on the spectrum crunch. What I found interesting was the number of comments to the first post. In a way, I wanted to say, “I told you so.”

My cursory review of the comments found that consumers had no sympathy for disciples of 4G. Customers who swore that they only used their phones to (shudder) make phone calls were critical of consumers who spent too much time on the networks posting pictures, texting, and socially networking with friends that for half the monthly subscription price they could have lunch with.

I, along with one other commenter I read, raised the issue of this is what you get when you are afraid of consolidation. I repost my comment to CNN here for your review.

Slowing down inevitable price increases can only come about in one of two ways. The first way is unacceptable, which is to regulate prices. Wireless access to broadband, while increasingly important for commerce, is not a utility. Additional regulation in wireless will bring about greater inefficiencies in terms of service delivery. Wireless firms would have to create new service niches in order to subsidize rates for consumers who could otherwise not afford increased prices.

The second option is to allow more consolidation. Consolidation creates the economies of scale necessary for keeping rates down. Economies of scale means lower cost per unit of service provided. Bigger firms help to deliver this type of scale. This is why denying the AT&T, T-Mobile merger was a big mistake.

It looks like Congress may be headed to signing off on a payroll tax extension. Unfortunately for broadband consumers, the package includes allowing the Federal Communications Commission the flexibility to impose on large carriers, such as AT&T and Verizon, conditions designed to ensure competition should carriers win bids for broadcast spectrum.

Allowing larger companies to bid is the appropriate approach this legislation should take. I’m still not comfortable with a regulatory agency creating conditions that ensure competition. If those conditions were to give Sprint and T-Mobile, two companies that have taken mismanagement to a new level, some additional advantage, you may as well keep more efficient and better managed carriers from bidding for spectrum.

The Wall Street Journal reported today that some lawmakers would like to use proceeds from spectrum auctions to pay for portions of the payroll tax extension package. They would like to see some of the bid money going to offsetting the renewal of unemployment benefits and upward adjustments Medicare payments to health care providers.

The irony of the proposal is that some of these same lawmakers wish to draft legislation that would keep large wireless carriers such as AT&T and Verizon from participating in volunteer incentive auctions where carriers could bid on spectrum licenses given up by broadcasters. Keeping out the large carriers poses two problems.

First, like I’ve blogged about before, keeping out large carriers reduces the chance that spectrum is being put to its best use. Carriers willing and able to pay premium cash for the licenses would be left out.

Second, if you leave out the big guys with the deeper pockets, it means less money being used to offset Medicare payments and jobless benefits.

The notion that Congress would use these monies to fund welfare programs is not sound. Congress, who should be well aware of the limited availability of spectrum, should instead let these funds stay with the Federal Communications Commission. These funds could be used to leverage incentives for deploying more broadband infrastructure, a much better approach to growing the economy than funding jobless benefits.

A number of small carriers have sent a letter to Congress requesting that the Federal Communications Commission be given flexibility to set restrictions on who may bid for spectrum during voluntary auctions. Among the wireless carriers signing the letter were Sprint, T-Mobile USA, and C-spire.

Didn’t take T-Mobile long to take the money and run.

The carriers argue that competition would be limited unless the Federal Communications Commission is granted flexibility to restrict access to the auction by America’s two largest carriers, AT&T and Verizon. AT&T’s vice-president for legislative affairs, Jim Cicconi, raised the concern that restrictions on who can access the auction cannot be described as competitive.

I agree with Mr. Cicconi viewpoint. Can you really call a process competitive when the agency responsible for access to spectrum blatantly wishes to establish bottlenecks for those companies willing and able to provide wireless services? Companies, large and small, should have access to the process. Let the highest bidder for a respective swath of spectrum receives it.

Sprint and these other carriers had years of opportunity to grow their networks; merge if they had to; in order to compete with larger carriers. By restricting the carriers with the larger economies of scale from participating will only mean unserved and underserved communities may be seeing increased prices, more dropped calls, or worse yet, no service.

Bruce Mehlman points out in recent blog post that the FCC cannot have it both ways. It cannot label an auction process as competitive and then support an egregious barrier to entry by allowing some companies to bid on spectrum and leaving others on the sideline.

A participant in a free market enters with a willingness and ability to sell or buy goods and services.

Should spectrum go to the entity indicating through the highest bid, that they have the capacity to purchase and use spectrum?