Lost in La Mancha of the 700 MHz auction

 

Lost in La Mancha of the 700 MHz auction
Sound bites coming out of the 700 MHz auction debate seem fit for a FOX News debate, moderated, of course, by FCC Chairman Kevin Martin. And like most of these debates, the host rarely gives either side the satisfaction of victory. Yesterday, various news outlets obtained a leaked copy of Martin's proposal, which reportedly falls short of a wholesale requirement, but does demand a level of open access on two 11-megahertz blocks in the 700 MHz band. In addition, the proposal sets aside a separate national 10-megahertz block for bidding that would require the winning bidder to work with public safety on adjacent frequencies to improve first-responder communications. Since it does not require wholesaling the two 11-megahertz of spectrum, Martin's proposal, might still be palatable to the incumbent carriers as well as the open access coalition. Let's meet the players:

Steven Zipperstein, Verizon Wireless' general counsel: "Reports of special rules for any company or segment of the high-tech industry that would tip the balance in their favor and circumvent a true auction are problematic… Consumer choice would be the casualty of policies that mandate that all companies do the same thing the same way… The launch of Apple's iPhone, which works only on a competitor's second generation network, continues to represent the 'walled garden' approach that has others calling for open access."

Tim Wu, Columbia Law School professor: "Some will argue that device portability rules will endanger the quality or security of the network. While no one doubts the importance of these issues, these arguments are generally red herrings. They are precisely the argument that the old AT&T made for decades through the 1970s to defend its rule denying consumers the right to attach telephones to its network. Notice that we don't prevent consumers from hooking up the televisions or radios of their choice on the argument that they might install 'low quality' devices. In the end, consumers do not need phone companies to 'protect' them from 'bad' cell phones. They can make the choice on their own. And when they have that freedom, we will all be better off."

Steve Largent, CTIA CEO: "Crafting special rules for a company with a market cap of $170 billion to address problems that don't exist in our competitive market makes absolutely no sense whatsoever."

Richard Whitt, Google's Washington telecom and media counsel: "What would happen if one or some of the existing national wireless carriers win this valuable spectrum at auction? They would probably use it to protect their existing business models and thwart the entry of new competitors--both understandable actions from a rational business perspective. Beyond the loss of a valuable public resource, however, that outcome would not bring us any closer to fostering much-needed competition in the broadband market, or providing innovative new web applications and service offerings."

Reed Hundt, Frontline Wireless' vice chairman and former FCC chairman: "What the chairman has presented is a Trojan Horse, filled not with Greeks but with Verizon lobbyists. What America needs is a new national network that really works. If you let Verizon buy it [the spectrum] and put it in the bottom left drawer, you've done nothing."

J. William Lauderback, EVP, American Conservative Union: "What should surprise you is that the Republican chairman of the [FCC] agrees with them. That's right, the Republican Chairman of the FCC agrees with the Far Left Liberals!"

Obviously, neither side is happy, but let's take a look at the debate so far. What do the incumbents and newcomers really want? 

Most arguments presented by the debaters do not center on the need for a public safety network, which seemed to be the bait by which the open access crew originally lured Martin. Incumbent carriers might call this "putting lipstick on the pig."

As Google's Whitt put it: Verizon Wireless and CTIA's others representatives want the 700 MHz spectrum to continue to build out their networks as well as keep potentially threatening newcomers from threatening their business model. Fair enough.

Columbia Law School professor Tim Wu has led the charge of the open access crew: Flanked by heavy hitters Google and eBay (Skype), Wu is fighting for wireless net neutrality like a modern day Don Quixote. His romanticized notion of how the wireless industry works (or should work) is only forgivable because his stated aims are certainly in the consumer's best interest. Open access to phones, applications, services: Who doesn't want more choice?

Let's assume Frontline and other open access proponents can afford the spectrum. That's certainly the first challenge, but the real one is still farther off: Who will fund the even bigger investment required to build out the infrastructure for this so-called "third pipe" into the home?

Sure, Google has money and Google has expressed support for Frontline. But the Web giant has indicated an unwillingness to lean too heavily on its market cap for a venture it considers outside of its core business. Google is more likely to facilitate a bidding service for Frontline as a means to wholesale the spectrum.

The question remains: Who will build the physical network? Who will build their dumb pipe?

Despite the name calling and political pressure in many of the sound bites above, Wu's real enemies are quite similar to Quixote's enemies. Not windmills, but cell towers. -Brian [1]

P.S. Be sure to check out FierceWireless' new website: www.fiercewireless.com [2]. We've improved the site's navigation, changed the layout and upgraded the search functionality. Let us know what you think!