Public safety spectrum, here we go again

by on March 31, 2008 · 12 comments

Better late than never, here are my thoughts on the FCC’s auction for the D Block public safety band. There was only one bid for the block, Frontline Wireless to shut down, and some are even suggesting improprieties. Sadly, we’ve got a long way to go before we have an operating public safety network. Why did the D Block auction fail? I think at root the problem is that the FCC simply placed too many restrictions on the would-be licensee, and that’s something the FCC should keep in mind as it considers what to do next.

Under the D Block’s service rules the commercial licensee must come to an agreement with the Public Safety Spectrum Trust (which is the licensee for the adjacent public safety spectrum) about the details of the network to be built. If it doesn’t come to an agreement, the FCC can impose whatever requirements it sees fit on the licensee, and if the licensee surrenders its license or has it taken away, they must pay a forfeiture penalty that can run into the millions. Because there are no similar penalties for the non-profit PSST to come to agreement, this allows the PSST to basically dictate the terms of the network. Why would anyone bid for the privilege to be a part of that deal?

Sadly, Chairman Martin doesn’t seem to get this. He recently lamented the fate of the D Block:

“Did we get everything perfect in it? Obviously not because no one was willing to end up taking on that burden,” Martin conceded. “So, do I wish that someone was willing to take on that burden? Yes. And do we need to restructure it in such a way that someone is willing to take on that burden? Absolutely. But absent somebody else coming up with some idea to solve this, this is the only way to solve what’s really a public-safety crisis.”

Instead of expecting some selfless corporation to “take on the burden” of such a thankless deal, why not try instead to create a license aligned with the interests of both the private sector (profit) and public safety (cheap and interoperable communications solutions)? Here’s my recipe:

  1. Get rid of the PSST, a bureaucracy more than prone to capture that will do nothing but hold a commercial licensee hostage.
  2. Take the spectrum now held by the PSST and combine it with the D Block. Create two national licenses on the combined spectrum so as to inject competition and avoid a monopoly provider.
  3. Place public safety obligations on each of those licenses but allow the licensees to lease excess capacity. What sort of obligations? Obviously public safety should have priority, and leased access would only be secondary. Beyond that, the FCC could include minimum performance standards in the licenses to ensure that the networks are built to public safety standards without having to prescribe specific technologies or methods.
  4. Auction the licenses without reserve prices.

There are no doubt more than a few hurdles for such a plan to overcome, but I think it makes sense to allow market forces develop public safety networks. I’d love to hear any critiques of this idea. No doubt I’ll be submitting a comment to the inevitable rulemaking on this issue and it would help me to figure out the weaknesses of this scheme.

  • http://cei.org/people/ryan-radia Ryan Radia

    I agree with your conclusion that the D-Block failure was the result of excessive FCC restrictions on the would-be winner of the public safety spectrum auction. The high reserve price didn’t help, either.

    What if a single company were to outbid all others for both national licenses? Should revenue maximization be the FCC’s main objective in the auction, or is it more important to promote competition by ensuring that there are multiple players? In that case, spectrum fungibility comes in to play. How does the FCC decide whether to auction two, or three, or even ten national licenses, or instead regional licenses?

    I also wonder whether it’s necessary for a special chunk of spectrum to be set aside for public safety purposes. As you’ve mentioned before, public safety departments purchase lots of specialized goods and services from the free market without any special government-regulated supply chain. Spectrum is a unique animal, of course. Still, where there is a buyer, sellers should emerge, and so as long as public safety departments have requisite funding to sign contracts for communications services, there should exist an incentive for firms to construct reliable networks utilizing spectrum that isn’t allocated for public safety uses. Perhaps some of the revenue generated by auctions could be transferred to public safety departments to be used exclusively to fund wireless communications.

  • Ryan Radia

    I agree with your conclusion that the D-Block failure was the result of excessive FCC restrictions on the would-be winner of the public safety spectrum auction. The high reserve price didn’t help, either.

    What if a single company were to outbid all others for both national licenses? Should revenue maximization be the FCC’s main objective in the auction, or is it more important to promote competition by ensuring that there are multiple players? In that case, spectrum fungibility comes in to play. How does the FCC decide whether to auction two, or three, or even ten national licenses, or instead regional licenses?

    I also wonder whether it’s necessary for a special chunk of spectrum to be set aside for public safety purposes. As you’ve mentioned before, public safety departments purchase lots of specialized goods and services from the free market without any special government-regulated supply chain. Spectrum is a unique animal, of course. Still, where there is a buyer, sellers should emerge, and so as long as public safety departments have requisite funding to sign contracts for communications services, there should exist an incentive for firms to construct reliable networks utilizing spectrum that isn’t allocated for public safety uses. Perhaps some of the revenue generated by auctions could be transferred to public safety departments to be used exclusively to fund wireless communications.

  • http://jerrybrito.com Jerry Brito

    Ryan,

    I didn’t make it clear, but there would also be a rule that would prevent one firm from buying both licenses. The reason we want two firms is precisely to avoid a monopoly. Second, why not five or ten or whatever number the market figures out is optimal? You’re right, but I’m trying to work within the constraints of the spectrum licensing system as it exists. It’s also a question of how many competing networks are viable in the amount of spectrum available from the D Block and PSST. I chose two because it’s just one more than what the FCC had planned and it gets us competition.

    As to why not just have flexible spectrum and let public safety agencies buy whatever they need without having any special chunk of spectrum be designated for PS, you’re right, that would be ideal. But the fact is that today all agencies have spectrum licenses handed to them for free. If you built a public safety network on flexible-use spectrum you’d have to compete with all that free spectrum. It also wouldn’t get built in the first place because the alternatives are much more profitable. Given the constraints we have, you have to have a PS obligation to lower the value of the spectrum and get private competitors in.

  • http://jerrybrito.com Jerry Brito

    Ryan,

    I didn’t make it clear, but there would also be a rule that would prevent one firm from buying both licenses. The reason we want two firms is precisely to avoid a monopoly. Second, why not five or ten or whatever number the market figures out is optimal? You’re right, but I’m trying to work within the constraints of the spectrum licensing system as it exists. It’s also a question of how many competing networks are viable in the amount of spectrum available from the D Block and PSST. I chose two because it’s just one more than what the FCC had planned and it gets us competition.

    As to why not just have flexible spectrum and let public safety agencies buy whatever they need without having any special chunk of spectrum be designated for PS, you’re right, that would be ideal. But the fact is that today all agencies have spectrum licenses handed to them for free. If you built a public safety network on flexible-use spectrum you’d have to compete with all that free spectrum. It also wouldn’t get built in the first place because the alternatives are much more profitable. Given the constraints we have, you have to have a PS obligation to lower the value of the spectrum and get private competitors in.

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