Lowenstein's View: Wireless windfall--let's put that money to work

Mark Lowenstein

At the time of this writing, the AWS-3 auction has passed the $30 billion mark, with weeks possibly still to go. We could be looking at a $40-$50 billion auction, which is 4-5x Wall Street's initial consensus expectations. And what are the government's plans for this money? From what I understand, about $7 billion is earmarked for the FirstNet public safety network, with the remainder going to the Department of the Treasury to help pay down the deficit. Yes, you read that right. We have $30+ billion--there are more than 100  countries in the world with GDPs of less than $30 billion--that is going to disappear into the black hole that is the U.S. federal government. Of course, the irony is that our pro-competition, anti-consolidation FCC has ended up with an auction in which only the biggest of the big boys can meaningfully participate in. No new entrants, innovative business models, or entrepreneurs here. It's just adding more lanes on the highway. Another irony is that for $30 billion, we could build a brand new broadband wireless network from the ground up.

What an unbelievable waste. $30 billion barely makes a dent in the $500 billion annual deficit--it's not as if this sum will really help pay off the deficit sooner, like paying extra principal against your mortgage. There are no plans to pay for new programs or restore budget items that have been cut. And to put things in perspective, the deficit is projected to be about 5 percent of GDP in 2014, which is about half what it was in 2009 and about the average of what it has been over the past four decades (why the Democrats didn't make this point more loudly in the mid-term elections is a mystery to me).

I think we should make a concerted effort, as an industry, to lobby that these funds be used for a more concrete, worthwhile purpose. For the purposes of this column, I am going to assume that we end up with $30 billion net of FirstNet. I'll also avoid tempting, "TARP-like" suggestions like rebuilding our roads, building high speed rails or repairing our national parks, and focus on tech/connectivity opportunities.

Here are five ideas:

  • Dollars for schools. There are about 100,000 public schools in the United States. $30 billion translates into $300,000 per school that can be used to upgrade their technology (such as broadband and Wi-Fi), expand STEM programs, train teachers, and so on.
  • Improve our position in broadband. With four near-nationwide LTE networks, the U.S. is the top tier in mobile broadband. But we are decidedly middle of the pack when it comes to fixed broadband services. I'd love to see that $30 billion plowed into improving our broadband infrastructure: be it expanding Verizon FiOS or AT&T GigaPower to more markets, or encouraging Google and others to build more fiber networks. $30 billion could also get us a killer fixed wireless broadband network, or fantastic Wi-Fi in cities, replicating New York City's innovative LinkNYC plan.
  • Finally get to that last 20 percent. There have been a bunch of well-intentioned programs to connect the 20 percent of U.S. households that still don't have access to decent broadband (many of them in rural areas). But we haven't really moved the needle here. The government has done a poor job of managing this. There are some new and exciting technologies that could be used to more affordably reach these households: satellite, TV White Space, fixed wireless. Could these auction proceeds be used to accelerate the Connect America Fund's programs and really make it work?
  • Provide a 'broadband subsidy' for low-income families. Having access to broadband in the 21st century is a necessity. It's like water or electricity. But U.S. broadband services (wireless or wired) are comparatively expensive. The average household spends $4,000 per year on "connectivity" (wireless, landline phone, cable, broadband). One alarming study showed 25 major cities where at least 40 percent of households don't have fixed broadband because they can't afford it. Why not use the $30 billion towards a pool to help these households pay for broadband--wired or wireless? To give you a sense of how meaningful that could be, if we allocated $30 billion to 20 percent of U.S. households to help them pay for broadband, that's $1,500 per household, which could provide a $20 per month subsidy for six years.
  • Help bridge the global broadband gap. Although we still have broadband connectivity and affordability problems in the U.S., the situation is far more dire in other geographies. Here's an idea: let's negotiate an agreement with other countries holding similar auctions, and earmark a percentage of the proceeds toward a "Broadband Opportunity Fund," which would help either pay for broadband networks to get built in under-served areas, or help provide affordable broadband service for low-income households in developing countries.
  • Create a "smart cities" fund.  There's a confluence of two important trends. First, is the unmistakable movement toward more people living in cities. Second, the combination of technologies such as broadband, mobile, Wi-Fi, smartphones, sensors, apps, and so on are allowing us to think of all sorts of "smart city" concepts. Companies such as IBM and Cisco are making significant investments in this area. We could create a "Smart Cities Board," comprised of all-stars from the public and private sector, who would allocate funds based on proposals submitted by cities. This could be a boon for U.S. innovation and for the economy.

All this said, the response will probably be that the use of auction proceeds has already been written into law. But we have a progressive FCC Commissioner, a new Congress, a President who clearly wants to make his mark, and an unexpected financial windfall of meaningful proportions. Is there a way?

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.