“It is common error to infer that things which are consecutive in order of time have necessarily the relation of cause and effect.” Jacob Bigelow.
I read with great interest Harold Feld’s most recent post, which is ostensibly about the AWS-3 band, but nevertheless manages to meander its way along the gamut of spectrum topics related to the National Broadband Plan. Although interesting (and I have a healthy respect for Harold’s expertise in spectrum matters), I take issue with a few of his conclusions.
While it is of little consequence to policy, I disagree with Harold’s characterization of the history of the AWS-3 band. Harold characterizes the band as “forlorn” until M2Z came along and reminded everyone that the band was awaiting service rules. In actuality, a complete draft NPRM (replete with tentative conclusions) existed long before M2Z made its filing. Unfortunately, a certain legal advisor (ahem, me) wanted the NPRM to ask broader questions, so it was held up for redrafting. At about the time the redraft was completed, M2Z filed its “application.” M2Z’s filing raised a slew of novel legal and technical issues and (initially) a bevy of interest on the 8th floor. Resolving the legal questions posed by the M2Z filing and socializing the issues on the 8th floor was what slowed progress on the AWS-3 band. In the absence of the novel M2Z filing, an NPRM for the band would likely have been issued much earlier.
But that’s all just history now, and Harold can’t be blamed for lacking the requisite historical information. He can, however, be faulted for his illogical assumption that the removal of prophylactic spectrum cap regulations produced two “also rans” (presumably T-Mobile and Sprint Nextel) in the wireless market. Here Harold is guilty of the common error described by Jacob Bigelow. There is no cause and effect relationship between the elimination of spectrum caps and current market shares in the cellular industry.
There is no cause and effect relationship between the elimination of spectrum caps and current market shares in the cellular industry.
After the cap was eliminated, the biggest winner in the spectrum wars was Sprint. With the acquisitions of Nextel and Clearwire, Sprint Nextel has the most extensive spectrum holdings in the U.S. Of the top four wireless carriers, T-Mobile has the least extensive spectrum holdings. Nevertheless, T-Mobile continues to add new subscribers and Sprint Nextel continues to lose them. Given these results, something other than relative spectrum holdings must account for Sprint Nextel’s relative market position. Could it be that management is primarily responsible for the performance of wireless companies? That is the obvious cause, but it is a hard one for the policy narcissist to accept. The policy narcissist believes that policy is the primary driver of market results rather than, well, the market. It would likely surprise the legions of business people that are actually running wireless companies that their work is superfluous and that their Washington representatives are primarily responsible for the success or failure of their companies. If the viewpoint of the policy narcissists were true, Larry Krevor would be doing those ads for Sprint Nextel rather than Dan Hesse. Fortunately for Larry, Harold can’t demonstrate cause and effect, and Sprint Nextel can’t blame its fortunes on the elimination of the spectrum cap.
Now, now, don’t say “can’t” until you give me an actual chance to answer your challenge. How do you know I can’t show causality until I’ve tried.
In fact, there are two elements to your challenge. There is the historic element (did elimination of the spectrum cap create or substantially contribute to the current distribution of residential customers), and the forward looking policy element (would spectrum caps actually enhance competition and be a worthwhile policy to adopt for upcoming spectrum auctions). Without the second (and unstated) half, the answer is simply an academic exercise.
Unfortunately, an honest effort to address this question would take me a couple of hours. And the answer would still be ambiguous, because demonstrating causality in a complex environment like this is always a challenge. Spectrum caps are one element, as was the phenomenally poor management of the Sprint Nextel merger. I can state with fair confidence that Verizon and AT&T would not have grown to their present size and subscriber base had spectrum caps blocked acquisition of Altell by VZ and Dobson and Centennial by AT&T. But these are glib answers to a question deserving of more complex response. But it is equally as glib, and therefore incomplete, to say that because Sprint Nextel bungled their merger, the elimination of spectrum caps was not a seminal event reshaping the industry over the last 5 years.
Hopefully, I will find the time in the next few days to answer more fully on my blog. Interestingly, it is easier to make the case for imposing new spectrum caps, without regard to the historic impact of the removal of spectrum caps. This is because spectrum caps would no longer be prophylactic. They would prevent expansion by acquisition (as opposed to by customer migration) by either of the two largest firms, and would allow the existing also-rans to match capacity by acquiring new spectrum licenses at auction.
You are right — I shouldn’t have said you can’t do something without giving you a fair opportunity to try. I based “can’t” on my own view that it’s not possible. I am interested in your view that, going forward, spectrum caps would not be prophylactic, which seems counter-intuitive to me. Hopefully you will find time for a more robust discussion of the issue.
How is Dish customer support soooo bad?