Updated on September 6th, 2011
The National Broadband Plan recommended that the FCC “accelerate terrestrial deployment in 90 MHz of Mobile Satellite Spectrum (MSS).” The FCC began implementing this recommendation this year when it granted LightSquared a waiver to use its MSS spectrum for a wholesale terrestrial LTE network intended to “enhance[e] competition among mobile wireless providers.” Until recently LightSquared appeared to be the FCC’s only near-term opportunity for a new nationwide, facilities-based mobile broadband competitor.
That changed a few weeks ago when Dish Network unveiled its own plans to build a terrestrial LTE network using MSS spectrum. Dish Network is buying both DBSD North America and TerreStar, who together hold 40 MHz of MSS spectrum in the 2 GHz band. In its recent application seeking approval for the Terrestar transaction and waivers to provide terrestrial service (available here), Dish Network says that, if its requests are granted, it will make “substantial terrestrial network deployment commitments intended to increase wireless broadband competition, including in rural areas.” (Application at 48.) These commitments include deploying an LTE Advanced network pursuant to a “reasonable, attainable buildout schedule keyed to commercial availability of the LTE Advanced Standard.” (Application at 48.)
Dish Network’s plan to build a new 4G broadband network offers the potential for significant competitive disruption in both the mobile broadband and MVPD markets, especially when combined with the retail and streaming video assets Dish Network acquired from Blockbuster earlier this year. Due to capacity and other limitations inherent in satellite broadband services, satellite TV providers don’t currently offer broadband services capable of competing in urban and suburban markets with the cable modem, DSL, and fiber offerings of other multichannel video programming distributors (MVPDs). The inability of satellite TV providers to offer competitive broadband services in urban and suburban markets is in part why cable operators have maintained approximately 70% market share while Dish Network has competed primarily on price. With its planned 4G deployment, Dish Network could compete on quality of experience by offering video, broadband, telephone, and mobile services on integrated service platforms through Blockbuster’s virtual and retail stores (imagine mobile devices that access a Blockbuster apps store with streaming content, a TV device that seamlessly combines Dish Networks satellite programming with streamed wireless services, etc.). For the first time, Dish Network would be able to compete across the entire value chain.
Dish Network is also well positioned to quickly become a formidable new competitor in the mobile broadband market. Unlike a typical new entrant, Dish Network already has significant brand awareness and customer relationships, existing retail networks, and an industry partnership with Frontier Communications. Dish Network could leverage its 14 million MVPD subscribers, 4 million Frontier Communications customers, and Blockbuster retail stores to quickly generate a nationwide presence in the mobile market and substantially lower its customer acquisition costs. Because Dish Network does not have an embedded base of devices that depend on earlier generations of wireless technology, it would be able to deploy and maintain a single, cost effective LTE Advanced network. Its spectrum would also enable the use of spectrally efficient 20 MHz channels – a channel size some incumbent mobile operators cannot deploy due to the limitations of their spectrum holdings. (For example, Verizon’s current generation LTE network is limited to 10 MHz channels based on its available spectrum.) Although Dish Network may eventually need more spectrum, as a new entrant with no legacy technology concerns, Dish Network wouldn’t face a capacity crunch anytime in the near term.
Given the potential for Dish Network to increase competition in both the MVPD and mobile markets, I expect the FCC to grant the application. It would be difficult for the FCC to deny Dish Network’s application after granting similar relief to LightSquared. Even if the FCC would have preferred to reassign the 2 GHz MSS spectrum using an incentive auction, Dish Network’s commitment to “creating a competitor against the mobile broadband incumbents” (Application at 22) is an offer the FCC is unlikely to refuse.
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mobile spectrum wireless wireless competition
Updated on August 25th, 2011
Until recently, the FCC appeared to believe that the Communications Act prohibited the marketing and sale of signal boosters without licensee consent or control. That view has apparently changed. The FCC initially considered simply declaring that signal boosters could be marketed and sold without licensee consent, but ultimately decided to issue an NPRM proposing rules governing third-party signal booster transactions.
The FCC’s new interest in legitimizing the distribution of signal boosters without licensee consent or control is perplexing. Given the FCC’s ongoing existential crisis, it’s not surprising that its signal booster proposal lacks any market analysis justifying regulatory intervention (e.g., there is no evidence that consumers lack access to signal boosters authorized by licensees). What is surprising is that legitimizing third-party signal booster sales would be flatly inconsistent with the regulatory approach the FCC adopted last year in its net neutrality order. In the net neutrality order, the FCC recognized the wisdom of affording network operators “the latitude they need to effectively manage their networks.” (Net Neutrality Order at paragraph 86.) Network operators are thus able to “implement reasonable practices to ensure network security and integrity, including by addressing traffic that is harmful to the network.” (Net Neutrality Order at paragraph 88.) Signal boosters implicate the same reasonable network management concerns the FCC address in the net neutrality order, but, inexplicably, the FCC wants to specify detailed network management practices for signal boosters. Read the rest of this entry »
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mobile wireless
Updated on August 17th, 2011
In my initial post addressing Googorola, I suggested that Google’s motivation for buying Motorola may be less about patents and more about emulating Apple’s vertically-integrated mobile device platform. If I’m right, the deal would have a significant impact on competition throughout the mobile ecosystem and mobile broadband policy. Although I can’t cover all the possibilities presented by Googorola in one post, here’s my take on some interesting potential winners and losers in the mobile market and in mobile policy.
Potential Winners
Googorola: If Google’s stock price is any indication, it looks like the market thinks the deal is a mistake. In think the alternative – failing to even try to monetize Android’s 40% market share – would be a much bigger mistake. Read the rest of this entry »
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merger mobile wireless wireless competition
Updated on August 16th, 2011
Google announced yesterday that it has agreed to buy Motorola Mobility for about $12.5 billion, a premium of 63% to the closing price of Motorola Mobility shares last Friday. Google’s CEO, Larry Page, said in a corporate blog post that the merger will “supercharge Android” and strengthen Google’s patent portfolio. Initial stories focused on Motorola’s patent portfolio, saying it is “the centerpiece of the deal.” I’m skeptical this deal is primarily a patent play. A 63% price premium for a major hardware manufacturer with ongoing operations is a lot to pay for patent defense. The largest patent verdict in U.S. history to withstand appellate review was only $290 million. That’s not chump change, but it is significantly less than $12.5 billion. It’s also telling that Google first raised Android patent issues less than two weeks before announcing the Motorola deal. Google’s recent post alleging patent attacks on Android looks like a transparent effort to focus deal commentary on Motorola’s intellectual property and divert attention from other aspects of the deal. Read the rest of this entry »
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merger mobile wireless wireless competition
Updated on August 15th, 2011
Captain, Road Prison 36: What we got here is… failure to communicate. Cool Hand Luke (1967).
“People love to categorize.” Categorization helps us make sense of a complicated world. But, when categorization doesn’t reflect substantial similarities, it obfuscates as much as it illuminates. So it is with communications policy, which is categorized primarily by the technologies used to deliver communications services (“stovepipes”) rather than their impact on consumers. This approach to categorization obfuscates the relevant question – whether a particular regulatory approach maximizes consumer welfare (rather than the prospects of particular competitors).
If the government subsidizes universal broadband, it would render government subsidization of over the air broadcast duplicative.
The ongoing debates about broadcast incentive auctions and universal service reform offer a poignant example of such obfuscation. Because the services that are the subjects of these debates use different technologies, and are thus categorized separately, these debates are being conducted independently. When viewed from the perspective of consumer welfare, however, these debates are inherently interrelated. They both involve regulations that are intended to address the same concern – the widespread dissemination of information to consumers from a multiplicity of sources.
The core question in both debates is to what extent the government should subsidize consumer access to information. Because broadband service provides access to far more information than is possible through over the air broadcast, answering this question in the universal service debate informs the incentive auction debate: If the government subsidizes universal broadband, it would render government subsidization of over the air broadcast duplicative.
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broadband mobile spectrum Universal Service Fund USF wireless