If all goes according to plan, next year the Federal Communications Commission will convert a big block of spectrum currently being used for television broadcasting to use for cellular service. Broadcasters will be paid to voluntarily relinquish their spectrum, which will then be auctioned off to wireless providers at a net profit to the U.S. Treasury.
One of the most important questions about this process is whether AT&T and Verizon, the nation's leading wireless companies, will be allowed to win the bulk of that spectrum. These companies have the deepest pockets and many observers believe that they would submit the highest bids. But some observers, including the Department of Justice, have warned that letting them win would represent a huge missed opportunity to increase competition in the wireless market.
T-Mobile, the nation's fourth-largest wireless carrier, argues that AT&T and Verizon's goal in acquiring spectrum would be less to expand their own networks than to prevent rivals such as T-Mobile from expanding theirs.
But Verizon's supporters have a clever retort. Leslie Marx, an economist at Duke University, produced a Verizon-sponsored white paper on the issue. And she points out that while T-Mobile's lobbying arm has been complaining about a shortage of spectrum, the company's television commercials have been portraying things very differently:
"While overcrowded networks can slow your data, our network has the room to let data flow freely," the voiceover says. A gush of what looks like Pepto Bismol bursts from the left-hand pipe emblazoned with T-Mobile's logo, representing the gush of data that flows on T-Mobile's network. A much smaller volume of liquid the color of antifreeze trickles from the unlabeled pipe on the right side of the screen. The narrator touts T-Mobile's "nationwide network with 50 percent more bandwidth per customer than other carriers."
So while T-Mobile's lobbyists argue that the company needs more spectrum to compete effectively, its commercials are bragging about much capacity its network has.
But T-Mobile Vice President Kathleen Ham says Marx's critique ignores the fact that not all spectrum is created equal. Low-frequency spectrum, like the 600 MHz spectrum that will be auctioned off next year, can travel better through buildings and over long distances. According to the Justice Department, AT&T and Verizon control 78 percent of low-frequency spectrum, defined as spectrum below 1000 MHz. Ham says T-Mobile barely has any.
That's important, Ham says, because low-frequency spectrum is needed to compete effectively in rural areas (where the longer range of low-frequency spectrum allows covering more ground with fewer towers) and in dense urban areas (where the ability of low-frequency spectrum to penetrate buildings is key to providing good service). If you have an unobstructed view of a T-Mobile cell tower, then you'll enjoy the surge of data depicted in the T-Mobile ad. But it's harder for T-Mobile to provide good connectivity in remote areas and in skyscraper canyons.
So, T-Mobile argues, if policymakers want all Americans to benefit from a competitive market, they need to ensure that smaller carriers have access to low-frequency spectrum. And Ham says that "this is the last shot at low-band spectrum for the foreseeable future." So T-Mobile wants the FCC to establish a cap on the fraction of spectrum below 1 GHz that any one wireless carrier can acquire in a given geographic area.
While it hasn't endorsed T-Mobile's specific proposal, the Justice Department supports the concept of restricting how much low-frequency spectrum any one carrier can own. In comments filed with the FCC in April, the Obama administration argued that "rules that ensure that the two smaller nationwide carriers [e.g. Sprint and T-Mobile] are not foreclosed from access to more spectrum, and particularly low-frequency spectrum, could benefit consumers. Auction rules of this nature would ensure the smaller nationwide networks, which currently lack substantial low-frequency spectrum, would have an opportunity to acquire it. Such an outcome could improve the competitive dynamic among nationwide carriers."
And, T-Mobile says it has found the perfect way to illustrate its point: with a Verizon television ad.
The teenage son in this ad explains to his technology-challenged father that 700 MHz spectrum allows Verizon to deliver "consistent speeds indoors or out." Verizon, he says, has "more fast LTE coverage than all other networks combined."
T-Mobile wants to offer first-class "indoors or out" coverage too. But the wireless carrier says it can't do that without some of the 600 MHz spectrum being put up for auction next year. Without explicit pro-competitive rules, T-Mobile says, it will be outbid by AT&T and Verizon.
A Verizon spokesperson declined to comment for this post.