Lowenstein's View: Preventing a wireless mess in Washington

Wireless is among the most vibrant industries on the planet. It is an important source of innovation and employment growth. It is a major driver of many of the hottest companies in the world today, from Apple, Google, and Qualcomm to Facebook, Twitter, Yelp, and Pandora. And the United States leads the world in many metrics: innovation, patents, capital invested, 4G deployment, smartphone adoption, mobile data utilization, and so on.  

Unfortunately, Washington is increasingly getting in the way of the future growth of the wireless industry in the U.S. Instead of fostering competition, Washington is hampering it. Instead of treating spectrum as a critical element of infrastructure for the information age--not unlike how the interstate highway laid the groundwork for the economy of the last half-century, Washington has exhibited a relative lack of urgency. Every major decision has become highly politicized. As an example, the bill to provide sub-700 MHz spectrum for wireless, which passed in February after years of debate and deadlock, was attached to, and is paying part of, a bill authorizing an extension to the payroll tax cut. Not exactly relevant. Timing of the auction, and a lot of other specifics, is still enmeshed in complex issues of how to relocate and compensate broadcasters, who currently occupy that spectrum (and who originally received it for free).

Remember how John Edwards spoke of "Two Americas" (perhaps a precursor to the 99%-1%)? Well, to me, there are "Two Wirelesses:" there's the Silicon Valley wireless industry--innovative, nimble, driven by Apple, Google, Facebook, app developers, et al; and there's the quasi-regulated Washington wireless industry, which in my view often fails to grasp the tectonic changes occurring in mobile and digital media.

Let's look at developments over the past year or so. In the Silicon Valley wireless industry, Apple's market cap has nearly doubled (heavily driven by iPhone and iPad), wireless data traffic has nearly tripled, and mobile-related investing, M&A, and IPO activity are at their highest ever point. Major studios and networks made significant progress on "content everywhere" initiatives, of which mobile is a major element.

In the Washington wireless industry, bureaucrats allocated significant resources to block the AT&T/T-Mobile deal, and are now carefully scrutinizing the Verizon-Cable deal--all in the name of "fostering wireless competition." And how's that "wireless competition" ledger looking? Let's start with LightSquared, where the FCC approved, and then revoked, its license to build a satellite-based network. This was a game of political intrigue that will be a great book or a "60 Minutes" story some day. The LightSquared debacle naturally ensured that Dish's proposal is getting much closer examination. As for the incumbent operators, the capacity crunch has forced AT&T to raise data prices and resort to "throttling" (which, ironically, the FCC/DOJ worried would be the result of consolidation). And Sprint, T-Mobile, Clearwire, Leap, and others are not exactly the picture of financial health (or investor optimism).

The FCC is to be congratulated for its work on getting the spectrum bill through, especially amidst a mind-boggling array of lobbying by special interest groups. Although there are still a lot of details to be worked out, the auction process is creative. And there's something for everyone, from funds for a public safety network to a reserve guard bands for unlicensed (read: super Wi-Fi) usage. But the FCC has promised a lot, and there are lots of devils in the details that could scuttle or significantly delay the process. The priority is to ensure that a significant swath of spectrum becomes available, as quickly as possible, in order to meet demand that, now that we have true wireless broadband (LTE) for the first time, will follow a similar trajectory as the wired Internet. The FCC must be careful to not overly engineer who gets this spectrum, or erect unfair barriers to incumbents. Pricing for LTE is presently quite conservative--Verizon and AT&T are basically saying, "yeah, we have LTE, but don't use it too much."

As the broadcast spectrum auction winds its way through the process, the FCC should fast-track ways in which less controversy-laden and delay-prone capacity can be put to productive use. This means: quickly resolving Dish, and being more open to who gets that spectrum if Dish decides not to use it themselves; possibly revisiting LightSquared, with a mentality of "is there a way to make this happen?" rather than "can we find a way to prevent it from happening;" and thinking creatively about Sprint-Clearwire, so that valuable real-estate does not spend the next several years in financial purgatory.

Second, as for wireless competition and industry structure, regulators must abandon the 1970s, telecom-era prism through which they measure "what's good for consumers." The gadgets driving the gigabytes of consumption have evolved from phones to portable computers. Consumers desire near constant connectivity with these devices, using a combination of fixed and mobile broadband networks, depending on context. The job of Washington should be to "facilitate," not "regulate," to ensure that there is ample infrastructure to meet demand, at a reasonable price to consumers. This has worked pretty well on the fixed broadband side - consumers aren't flooding the lines with complaints of high prices or demanding umpteen more service providers. Ample supply of wireless capacity at reasonable cost to users is the best way to ensure that mobile remains a critical part of the innovation economy.

Mark Lowenstein, a leading industry analyst, consultant, and commentator, is Managing Director of Mobile Ecosystem. Click here to subscribe to his free Lens on Wireless monthly newsletter, or follow him on Twitter at @marklowenstein.