The Federal Communications Commission’s wireless bureau chief has some questions for Verizon. Specifically, they want to know why Verizon went to all that trouble bidding on spectrum in the 700MHz block only to consider putting it up for sale contingent on the closing of a deal to buy AWS band spectrum from Spectrum, Co.

Business plans change, FCC. It sounds like Verizon has weighed the cost of having the terms reduced on their 700 MHz band holdings post sale vs. holding the frequencies and not providing additional services. If they can provide better quality service in the AWS band (both bands support 3G and 4G services, then so what?

Verizon has until 22 May 2012 to respond to the FCC’s query.

DISH Network’s Charlie Ergen would like to see the Federal Communications Commission approve the use of the company’s satellite spectrum for terrestrial mobile broadband. Unfortunately the FCC is also considering rules for the use of satellite spectrum for the entire satellite sector.

I guess I can see the FCC’s dilemma. Cut DISH a waiver now, and the FCC would have to justify why other satellite company’s and wireless carriers couldn’t get the same exception. The rule would be gutted before it was even released in final form.

On the other hand, wait until a final rule is issued and add to the delay in getting spectrum into the hands of wireless carriers who need it in order to meet well documented consumer demand.

Hate to say it, but I have to side with the FCC on this one. Cutting DISH a waive now will only create regulatory gridlock down the road.

We have heard over and over again how regulatory uncertainty can impede decision making on the part of business. The same holds true for the communications industry. In an article published in the National Review Online, Kevin Hassett provided an example of the dampening effect on growth ill-advised policy can have.

Mr. Hassett referred to the Federal Communications Commission’s finding that transferring licenses from T-Mobile was not in the public interest and that such a transfer would have a negative impact on competition. What Mr. Hassett points out is that decisions like the one by the FCC would have a negative impact on the nation’s growth. He wanted us to envision the collective negative impact these types of decisions would have on an industry that accounts for one-sixth of the economy.

Private investment, such as the investment that would have been initiated by the merger, is at the base of any economic recovery. As much as we may talk about government making investments, it was private investment that drove growth during six years of the Clinton Administration and five years of the Bush II Administration.

On the issue of competition, the FCC’s decision to deny the license transfers was based in part on giving smaller carriers the opportunity to either enter or, in the case of Sprint, stay in the market. Smaller, regional carriers don’t have the economies of scale or other capital necessary to provide the same level of national output of wireless services, even with access to additional spectrum. Just ask T-Mobile.

If smaller carriers are not increasing their services, and AT&T and Verizon are not allowed to increase their services due to a lack of spectrum, these carriers will raise their rates in order to regulate the increase in consumer demand for wireless services. Reduced output and increased prices are characteristics of a monopoly, the very scenario the FCC allegedly wanted to avoid. Consumers get shafted on both ends.

This is the irony of over regulation. Not only is capital investment impeded, but the regulatory agency creates a non-competitive market.

Bruce Mehlman, co-chairman of the Internet Innovation Alliance, shared some insightful thoughts yesterday prior to a discussion on Capitol Hill about the future of broadband and the Internet:

“Pro-Internet policy successes came when government removed barriers, rather than adding new ones,” said IIA Co-Chairman Bruce Mehlman. “Unfortunately those days may be ending. While there is rare bipartisan agreement that the biggest challenge to broadband-enabled growth is lack of private investment and available spectrum, there is growing disagreement on how to fix it.”

I remember 1992 vividly (which means I’m getting old if I can remember anything from 20 years ago vividly). Local telephone companies were facing competition, serious competition, for the first time. There were up to 400 long distance companies in Florida, though most were resellers. Cable companies, who were providing ILEC by-pass services, were testing technology that would allow them to challenge the local phone companies. Regulators were asking BellSouth what the hold-up was in introducing …hold your breath … here it comes …ISDN! The calls for deregulation were growing. Everyone wanted to see truly robust, innovative, and fierce competition in the telecom and advanced services markets.

Yes, there was a time that regulators backed off, and that tactic worked. You didn’t have grass roots organizations hankering to know every minute detail of how a cable company, ALEC, or ILEC ran its business. They were truly consumer oriented, concerned not only about rates, but about the delivery of services to the underserved. Even they wanted to bet on innovation delivering services.

Not today, as Mr. Mehlman correctly surmises. Today with have innovation-hindering net neutrality rules. We have grass roots organizations like Public Knowledge and Free Press actually criticizing minority groups for supporting efficiency of service delivery. These groups have prodded and cajoled the current FCC into an apparent preference for a command and control regulatory scheme. While the FCC talks “robustness” and “innovation”, its actions, supported by grass roots groups that put its consumer ancestors to shame, speak another narrative; a narrative that says that markets are inherently no good.

Bubba and 1992. Along with my slimmer figure, we miss you.

I came across an interesting ex-parte letter to the Federal Communications Commission on the Verizon-Spectrum Co. deal. In the letter Public Knowledge is addressing the FCC’s spectrum screen, a tool the FCC uses to document where available spectrum is located. In the letter, Public Knowledge describes the screen as a tool that can help the FCC “maximize wireless competition.”

Maximize wireless competition? A government agency? The FCC?

The U.S. Department of Justice through its antitrust division may try to ensure competition by addressing market concentration, but even it cannot maximize competition. That’s not its job or the FCC’s.

To maximize competition the FCC would have to take on a command-and-control posture, telling the wireless industry how and where to price services; requiring that all participants share all market, pricing, and consumer information with each other; lower all barriers to market entry; and writing rules that keep zero economic profits at bay for a long enough to ensure that some predetermined number of competitors are in the industry before those profits are allowed to fall to zero.
That’s a tall order, Public Knowledge.