The FCC’s wireless dilemma: More cash, or more competition?

December 11, 2013

(Photo by ♔ Georgie R)

If you've been following the debate about wireless spectrum, you know that Sprint and T-Mobile are at loggerheads with Verizon and AT&T over how much of the airwaves the big carriers will be allowed to buy in an upcoming auction. If Verizon and AT&T manage to snap up the bulk of it, regulators worry they'll threaten competition in the wireless industry.

To avoid that fate, some have suggested imposing auction limits on the nation's two biggest carriers. In a Senate hearing Tuesday, observers got a glimpse of how these restrictions might take shape.

One option being considered is a set of caps that explicitly acknowledge Verizon and AT&T's current position at the top of the market.

"No one has ever suggested that the two dominant incumbents be excluded from the upcoming incentive auction," wrote T-Mobile, Sprint and a handful of other companies in a letter to the Senate Commerce Committee on Tuesday. "But they already control nearly 80 percent of all available low-frequency spectrum."

Rules that primarily restrict the largest carriers would free up more spectrum for other bidders, these companies argue. But experts disagree over the second-order effects — whether it would raise more revenue that way in the long run, for example, or whether the smaller carriers would be able to use that spectrum as efficiently as the larger ones.

Others argue that it'd be more fair to adopt a rule that enforces the same limit on all the participants, regardless of their existing holdings.

"I don't think one bidder has a good chance of gobbling up all the spectrum, but if people are concerned about that contingency, a cap that hit all bidders equally would mitigate" the worst effects, said Hal Singer, a senior fellow at the Progressive Policy Institute.

Another way to put this is that the small carriers favor what are called "asymmetric" spectrum caps that affect various carriers differently, while opponents prefer "symmetric" caps that don't account for existing market positions.

Sorting through all this is the Federal Communications Commission, which has to juggle sometimes competing goals in designing the auction. Making sure the auction generates enough wealth to fund other expensive projects is one example. But the FCC also has to consider whether the rules of the sale ultimately benefit consumers.

According to Singer, diverting spectrum to smaller carriers means they'll have to spend more money to take advantage of it, particularly in rural areas where the infrastructure may not exist. That in turn could mean higher costs that'll get passed on to consumers. As an argument for efficiency, this is true as far as it goes. With AT&T and Verizon having built out the largest networks nationwide, they're already in a strong position to put new spectrum to use.

But granting incumbents an advantage just because they already have one isn't exactly the strongest case for competition. The whole idea behind making spectrum available to smaller carriers is that the opportunity could result in a wireless industry where consumers have more, and more viable, options.

Brian Fung covers technology for The Washington Post.
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