Should spectrum be free? - page 2

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Enter the government's $7.2 billion broadband stimulus plan. This is essentially the modern-day equivalent of the Universal Service Fund, which was conceived in the 1930s to subsidize the disproportionately high cost of providing telephone service to those living in sparsely populated areas. I support the objective of ensuring every household having access to broadband. It is a modern-day necessity, key to our country's economic competitiveness, educational infrastructure and national defense. Broadband, circa 2010, is arguably more important than TV or even phone service (although broadband guarantees the availability of phone service too).

But where is the money from the stimulus plan coming from? U.S. taxpayers. None of the money raised from wireless spectrum auctions, ongoing USF fees (which have become a rural telco boondoggle), or other taxes on your cable, phone, or wireless bill is being used to help directly fund the broadband stimulus.

So while the broadband stimulus is, for the most part a "giveaway" as part of the broader economic stimulus package signed into law in February, any additional spectrum for conventional wireless services will go to the highest bidder. When that happens, we will inevitably hear a chorus of complaints that all the spectrum went to wireless incumbents such as Verizon and AT&T.

Remember that there was a broader number of parties initially interested in the 700 MHz spectrum: cable companies, Google and other Internet heavyweights. But, like has happened in previous spectrum auctions, new players and other entrepreneurs got out when the bidding reached the stratosphere. They also determined that they could ride on telco networks ostensibly for free, and push for network neutrality to ensure unfettered YouTubing, Huluing, and Slingboxing on someone else's dime. On top of this, the FCC questions the wireless industry's "competitiveness" and criticizes the oligopolistic structure of the market, while at the same time seeking to maximize revenues from facilitating more network capacity. This approach is guaranteed to keep prices artificially high, quash new, entrepreneurial entrants, and slow the buildout of advanced networks. Paying a several billion dollar "ante" before the first base station is built puts any business plan on tenterhooks, particularly in a fragile economy and in an industry where a couple of bad quarters could cause big cuts to cap-ex budgets.

So, what should be done? I think it's time for the FCC to take a fresh look at how it awards spectrum, as part of a broader look at our economic and industrial policy. Wireless represents one of the fastest growing and most promising industries, alongside life sciences and green technology. It is key to our global competitiveness--and one where we have an important head start (thanks to Intel, TI, Qualcomm, Cisco, Apple, billions of VC dollars). I don't believe maximizing revenue should be the lynchpin of our spectrum policy, especially if the dollars raised through auctions end up in some random government department's general kitty. If the spectrum is "there,"--and it is--we should be thinking: "How do we put it to maximal use, as quickly as possible?" 

I would encourage the FCC to think differently this time. Perhaps this is idealistic, but instead of charging for spectrum, use free or reduced-priced spectrum as an incentive to encourage the construction of the most ubiquitous, highest performing wireless networks, as quickly as possible. Figure out how much might have been spent on buying the spectrum, and have that be diverted, instead, to build more networks and more quickly. Also recognize that our population density is a fraction of many countries whose broadband capabilities we covet, and, if we must charge for spectrum, use it to help networks get built in areas where the conventional business case might not pass muster. 

If the FCC insists on raising money from spectrum auctions, let's at least make sure that the dollars are somehow plowed back into the industry to:

  • Encourage new entrants
  • Facilitate network buildout in areas that might not necessarily make the economic cut, given that our population density is a fraction of many countries whose broadband reach we covet
  • Subsidize mobile broadband service to economically challenged individuals and households
  • Pay for spectrum relocation, on an expedited basis
  • Encourage new and innovative uses of wireless networks, from M2M for the national grid to tele-medicine and education.

Ultimately, this is an industrial policy decision. Instead of seeking to maximize revenues, let's consider what it would take to have the highest performing, most broadly available broadband networks, wired and wireless. Let's also consider how to balance the affordability of such services while ensuring a healthy and competitive marketplace. Achieving this could be a source of great competitive advantage in the 21st century global 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. Also: Join Mark and a distinguished panel for a provocative FierceLive! Webcast, The Great Disruptors: Key Technologies That Will Rock the Wireless World, December 16 at 2 p.m. EDT. Click here to learn more.

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