Updated on February 8th, 2012
Nearly everyone knows that cars need gas to run. They may not know that mobile devices need radio spectrum to run. Without spectrum – the invisible airwaves that make wireless services possible – mobile devices are as useless as a car that’s run out of gas. Nobody expects we’ll run out of gas any time soon, but the FCC expects we’ll run out of spectrum within the next two years if we don’t take action. In a report released in October, 2010, the FCC estimated that an additional 275 MHz of spectrum will be required to meet mobile data demand in 2014. Will we be able to provide enough spectrum within the next two years to meet consumer demand for mobile data?
If certain groups in Washington get their way, the answer will be “no”. Congressional efforts to make more spectrum available are being held up by the FCC and so-called “public interest” groups who want to play favorites with our spectrum resources. They are actively lobbying against spectrum legislation because they want to prevent companies like AT&T and Verizon Wireless from getting the spectrum they need to provide the services their customers want. That might be good news if you are a competitor of those companies, but it is very bad news if you’re a customer of those companies. If those companies are denied the spectrum they need, their customers will be denied the service they deserve. I doubt the millions of subscribers that rely on those companies for wireless communications are going to be happy when they find out the FCC is lobbying to deny them an opportunity to receive better service. Read the rest of this entry »
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Updated on January 17th, 2012
In his remarks at the Consumer Electronics Show last week, FCC Chairman Julius Genachowski said the debate over the spectrum crunch has been settled: If we don’t authorize incentive auctions and make more spectrum available, “consumers will face slower speeds, more dropped connections, and higher prices.” He also said the United States would lose the international wireless race and would pay the price in lost jobs, investment and innovation. That’s the bad news. The good news is broad, bipartisan agreement in Congress that we need to get incentive auctions done. Although the House and Senate differ on the details, they have both passed bills that would provide the additional spectrum the FCC Chairman believes will prevent the dire consequences he outlined in his remarks. Game over, everyone wins, right?
Not so fast. The Chairman also said “getting it right is as important as getting it done.” By “getting it right,” he means doing it the FCC’s way rather than the way Congress has proposed. Chairman Genachowski took issue with provisions in the House bill that would prohibit the FCC from allocating cleared spectrum bands for unlicensed use by companies that didn’t pay the price required to clear those bands, and would prohibit the FCC from rigging the auction results by limiting the ability of certain companies to win. Even assuming the FCC would do a better job making such decisions, I can’t agree that doing it the FCC’s way is more important than doing it at all when the FCC Chairman says doing nothing would kill jobs, harm consumers, and hurt our global competitiveness. (For a more detailed look at the substantive issues, see posts here and here.)
As AT&T said on its policy blog last week, “it would be a disservice to the Nation if the FCC is so adamant about preserving and enhancing its own power that it would risk killing this crucial legislation.” The House and Senate have already compromised on the key issue that held up the legislation last year, which was the reallocation of the D Block to public safety. We can’t afford to further delay the deployment of a nationwide, interoperable public safety network or the availability of more mobile spectrum while we argue about the extent of the FCC’s regulatory authority. It’s time to embrace the public safety compromise forged in Congress and declare victory.
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Updated on March 22nd, 2011
One of the most thoughtful pieces I’ve seen about the AT&T/T-Mobile deal is this post by Hal Singer posted in the Harvard Business Review. He lays out some good reasons why the merger would not result in higher prices for wireless consumers. I won’t try to lay them out here, but I will add one. Assuming T-Mobile disciplines prices now, it ability to discipline prices in the mobile market is likely to decline if regulators don’t grant the transaction. The reason: Verizon Wireless, Sprint and AT&T are all converting their networks to LTE, the mobile broadband technology that is poised to become the world standard, and T-Mobile isn’t. T-Mobile doesn’t appear to have any plans to move to LTE any time soon, and there is no evidence that Deutsche Telekom has any interest in investing the substantial capital necessary to upgrade T-Mobile’s network to LTE.
Without LTE, T-Mobile’s ability to compete would slowly diminish. Its customers would have an incentive to move to other providers who offer LTE, and T-Mobile’s costs would likely increase based on its use of an obsolete or nonstandard technology. (Obsolete if T-Mobile sticks with HSPA+ or nonstandard if T-Mobile were able to persuade vendors to support a more advanced version of HSPA+). With higher costs and technologically inferior service, it’s hard to see how T-Mobile would be able to discipline prices if the deal isn’t approved.
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Updated on March 20th, 2011
AT&T and Deutsche Telekom announced today that AT&T will acquire T-Mobile from Deutsche Telekom. Rumors have been floated for some time that Deutsche Telekom was looking to sell T-Mobile. AT&T is the most logical choice.
T-Mobile’s biggest challenge has been the deployment of a 4G LTE network. AT&T’s biggest challenge has been meeting the growing demand for data. The two companies together solve both challenges. AT&T will deploy 4G LTE to 95% of Americans and improve the performance of its data network. This will improve the customer experience and go a long way toward meeting the Broadband Plan’s goal of “lead[ing] the world in mobile innovation, with the fastest and most extensive wireless networks of any nation.” Faster wireless broadband speeds and better coverage are exactly what the President and the FCC have been trying to achieve, and this transaction promises to provide both.
Compared to past mergers, this one should be relatively seamless. AT&T and T-Mobile both use the same network technology, which should ease the transition. Their spectrum holdings are complimentary, and the companies and employees are both behind the deal. The Communications Workers of American have already expressed their support. AT&T is union company and will invest another $8 billion in its U.S. infrastructure due to the transaction.
The deal is has already been opposed as well. Public Knowledge says this is why we need strong net neutrality rules and wholesale requirements. But the FCC has already done net neutrality and has circulated an item proposing mandatory data wholesaling requirements for mobile wireless providers. From a competition standpoint, there will still be four or more mobile wireless providers post-merger in major markets, with Light Reading promising to add yet another player.
On balance, I think the FCC approves the deal. I think it will be hard for the FCC to turn down faster mobile broadband and 95% LTE coverage. At the end of the day, the benefits outweigh the potential harms.
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Updated on October 18th, 2010
Bloomberg’s recent story about Clearwire seeking to raise $2.5 billion to $5 billion in a wireless-spectrum auction has Wall Street all abuzz. A recurring question on Wall Street is whether regulatory approval would be given to such a sale, particularly if AT&T or Verizon were the winning bidder. To the extent Clearwire needs the funding to support its network construction, my view is that the FCC would likely approve the sale no matter who wins the “bidding.” I examine the possible scenarios below:
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