Scott Cleland blogs alertly on the problems with the framework proposed for the 700 MHz auction. Ah, do we never learn?
Wireless & Spectrum Policy 
It’s a shame that Frontline Wireless LLC‘s bold plan for a wireless broadband network providing nationwide interoperable public safety services in emergencies — that would be paid for by commercial users who can access the network on a wholesale, open-access basis at other times — includes a requirement that the successful bidder “must adopt open access policies not only on the E Block spectrum, but on any other licensed spectrum it holds.”
The rationale? According to Frontline:
The rationale for extending this requirement is clear: it prevents potential anti-competitive behavior. If the winner of the E Block spectrum holds other spectrum, it will be incentivized to offer consumers a single service device that will work on multiple bands. If the open access rules does not apply to all bands held by the E Block licensee, then the carrier could easily push consumers to other bands and tell them their devices are non-compliant. Consumers would not know (nor should they care) which band they are using, but a licensee acting strategically and in its best interests could readily defeat the purpose of open access requirements imposed on the E Block license.
But Frontline’s proposal already prevents such an outcome through a separate requirement that would prohibit the licensee from using the E Block network capacity for its own retail services or selling it to affiliated third parties. The necessity of an overlapping requirement doesn’t make a lot of sense to me, other than the fact that it has obvious value to Frontline as a restraint on competing bidders.
Alex Curtis of Public Knowledge sent me the following, which I’m re-posting with his permission:
I was listening to the conversation you were having with Tim Wu on the Tech Policy Weekly podcast. The visual voicemail feature of the iPhone actually doesn’t require anything special on the provider side of things. It’s essentially a VOIP voicemail service, which you can find on their own all over the Internet (Callwave is a good example), formatted with a GUI on a mobile phone.
To me, it speaks to the innovation that can come about when services are built to open standards.
I asked whether this means that messages on the iPhone are stored on Apple’s servers, rather than Verizon’s. He replied:
The podcast is considerably longer than usual this week because it featured an extremely productive discussion with Prof. Tim Wu on the merits of his “wireless Carterfone” proposal. Normally, we try to keep the podcast under half an hour, but one of the great things about podcasting is that here’s no reason we have to stick to the same length for every episode. In this case, the discussion was just too good to truncate. I encourage you to listen in—we’ve got a handy in-browser listening widget—and if you like what you hear you should subscribe.
One point I want to clarify: around minute 11, I observed that forcing unwilling incumbents to open their markets is usually an “expensive and messy procedure.” Wu responded that this amounted to preemptive surrender, and that we shouldn’t shy away from enacting good policy simply because it faces entrenched opposition.
Which is a good point, but let me expand a bit on what I meant. Obviously, if the problem were simply that the carriers don’t like a given proposal and will lobby against it, that’s not a good rationale for opposing it. However, I think two additional considerations are relevant. First, regulatory uncertainty is always bad. When the rules are unclear, existing firms will be reluctant to invest and new firms will be hesitant to enter the market. Moreover, those firms that do enter the market sometimes get the rug pulled out from under them when the regulatory body changes course—think of the way the CLECs got hosed in the 1990s.
The Washington Post reports on an effort by Public Knowledge, Google, and others to change several parameters of the upcoming 700 MHz auction:
The groups called on the FCC to require that the winners of a chunk of the spectrum allow “open access” — sell access to competitors on a wholesale basis. The open access requirement would allow a nearly unlimited number of competitors to offer wireless broadband services, said Gigi Sohn, president of Public Knowledge.
The groups also want the FCC to conduct anonymous auctions — where bidders wouldn’t know whom they’re bidding against. In the past, large wireless carriers have used transparent auctions to drive up prices on chunks of spectrum being bid on by small competitors, said Gregory Rose, an econometrician and game theorist working with open access proponents. In many cases, many larger carriers then dropped their bids after the smaller carriers were eliminated, he said.
Some carriers have also engaged in retaliatory bidding against other companies that bid on spectrum they were interested in, he said. The retaliating bidder will bid on spectrum the second company is interested in, “as a signal to say, ‘back off on the license I want, or I will drive the price of the license you want through the roof,'” Rose said.
As I wrote last week, I’m skeptical about the FCC telling the auction winners what to do with the spectrum once they’ve purchased it. But requiring that the bids be anonymous strikes me as a sensible idea. As I understand it (and I haven’t looked into the relevant research in any detail), in a less-than-liquid market like this, the details of the auction rules matter quite a bit. We should all be able to support the idea that the auction rules should be carefully designed to minimize the potential for collusive behavior by bidders.
You should be sure to check out Tim Wu’s smart comments on my Wireless Carterfone article.
In the latest installment of TechKnowledge, I critique Tim Wu’s recent article on “wireless Carterfone”:
True, a government-designed standard is not impossible, but “not impossible” is a long way from a good idea. Indeed, Wu seems to be implicitly conceding that it is far from the “simple requirement” he touts in his Forbes article. He seems to be proposing that the FCC dictate to wireless carriers what network services they must offer, who may access them, on what terms, and at what price.
History suggests that such efforts often end badly. Even when a government-created monopoly situation makes public utility regulation unavoidable, as in the Carterfone case, it can take a decade or longer for the dust to settle. The Clinton-era FCC attempted to create competition in the telephone and DSL markets by requiring Baby Bells to “unbundled” their local phone lines and lease them at FCC-determined prices to competitors. The Bells ultimately killed the plan using a combination of lobbying, litigation, and foot-dragging. But for the nine years between the passage of the Telecom Act in 1996 and the Supreme Court’s Brand X decision in 2005, telecommunications firms spent tens of millions of dollars on lawyers and lobbyists to seek advantage in the regulatory arena.
Tom Coseven left a comment making some good points about last week’s podcast and wireless Carterfone. I also got an email raising some of the same objections, so let me see if I can address them.
First, in response to Tom’s first point, I didn’t mean to give the impression that Carterfone was an antitrust decision. My point was simply that the policy rationale for regulatory intervention is much stronger when you have a single, government-protected monopoly than it is when there are four (relatively) lightly regulated incumbents. Whether or not you want to call them an “oligopoly,” it’s clearly more likely that market competition will discipline network operators in a 4-firm industry than in a 1=firm industry. And on the margin, that makes the case for regulatory intervention weaker.
Here’s Tom again:
On the subject of implementation of an open access requirement, it could be done quite easily. The GSM and CDMA standards allow for very transparent connectivity at the device level with no affect on your visual voice feature you use as an example. Those kind of widgets sit at a higher layer on the phone. Either the phone has the software or it doesn’t (sort of like a downloaded game).
Part of the problem here is that I have yet to see a specific explanation of what a “Wireless Carterfone” rule would actually say. If we’re just talking about a rule that says “network operators must allow any GSM or CDMA (as the case may be) phone to connect to their network,” that’s certainly a pretty clear rule, and it may not lead to any problems. However, I have the impression that two of the four carriers (the GSM ones) already respect this rule. So if that’s all we’re talking about, the rule seems kind of superfluous. Anyone who wants the freedom to attach the phone of their choice can sign up with T-Mobile or AT&T.
WASHINGTON, May 24, 2007 – The National Association of Broadcasters has enlisted the recently re-minted lobbying firm of Bluewater Strategies in its quest to combat the proposed merger of XM Satellite Radio and Sirius Satellite Radio.
In a Wednesday filing at the Senate Office of Public Records, lobbyists Tim Kurth, Andrew Lundquist and George Nethercutt, former Republican representative from Washington, said they would represent the NAB on the merger and other issues.
Many in the press (NYT, AP) are commenting this morning about on how Google on Monday encouraged the Federal Communications Commission to design their forthcoming auction of radio-frequencies to take advantage of real-time airwaves auctions. It’s one more bit of news emerging from the 700 Megahertz (MHz) auction, which the FCC must begin before January 2008. In the words of telecom analyst Blair Levin, of Stifel Nicolaus, it is shaping up to be “a pivotal auction” that could provide “new blood for broadband… or [a] telco/cable sweep.”
But there was another noteworthy filing at the FCC on Monday. The White Spaces Coalition — whose members include Dell, EarthLink, Google, Hewlett-Packard, Intel, Microsoft and Philips Electronics — met with commission officials and provided them with a prototype device for operating in vacant television broadcast channels. Philips’ devices joins one previously submitted by Microsoft. (Look at page 3 for a picture of the “Microsoft TV White Spaces Development Platform.”)
Just as the 700 MHz band offers new hope for telecom and video competition, many technology companies are looking to the vacant TV bands. The reason is simple: television channels so scattered, principally because they were designed around the 1940s-era NTSC standard, named after the National Television Standard Committee. As a look at the broadcast band for the ZIP code 20006 demonstrates, using FCC metrics, no more than four of the 21 channels between 30 and 50 are occupied: 32, 45, 47 and 50. That leaves 17 available within the “white spaces” between the frequencies where those stations broadcast. The occupied channel numbers will vary from city to city, which is why advanced sensing capabilities are needed to even begin to complete utilizing the spectrum in the television zone for something other than broadcasting.
or
http://www.publicintegrity.org/telecom/telecomwatch.aspx?eid=2940
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