Frontline on the Backburner – Time for the Congress to Rethink Spectrum Sale!

By Ken Pyle, ken dot pyle at viodi dot com

Over-the-air spectrum, just like the air we breathe, is a public good. That is, all of the citizens of the United States are co-owners in the this mostly invisible resource that is truly ubiquitous. Years ago, our Federal Government, the steward of our spectrum, decided the maximum public good could be served by auctioning off chunks of the 700 MHz spectrum to the highest bidders. Many have called this spectrum ‘beach front property’ and have suggested that this will be the last chance for operators to obtain so much spectrum with such desirable propagation characteristics.

With requirements for winners to be neutral as far as the devices that attach to the network and for a swath of the spectrum (D-Block) to be available for public safety use, the FCC is taking efforts to maximize the public good. Still, is it enough?

Reports that Frontline, a politically and financially strong start-up is closed for business puts the auction process in doubt; at least in terms of bringing new competition. Blair Levin, in an excellent analysis, suggests that if Frontline cannot prove the business case, then no new entrant will be able to do so. The fundamental problem doesn’t seem to be the cost of the network, but rather the cost of the airwaves (Eric Mantion, a former analyst for Instat suggested approximately $1.8B for a WiMAX build out to something like 75 or 80% of the country – well below the minimum $4.6 B FCC bid requirement) .

And even though the public will be receiving a benefit from the revenue that flows to the Federal coffers (probably already spent), consumers who use the network will pay a hidden tax through increased charges to the carrier to pay for the spectrum. To paraphrase Ronald Reagan, businesses don’t pay taxes, people pay taxes. In this case, it is a regressive tax, as it affects everyone who has wireless service. This is counter to the idea that it is good public policy to encourage broadband in any form.

So, the question, and one that Congress or maybe the President by Executive Order, should quickly and seriously consider is whether the public good would be better served by creating an unlicensed block or blocks of spectrum in the 700 MHz space?

This has worked out pretty well in the 2.4 and 5.8 GHz range, opening up new applications (e.g. WiFi connected computers). Imagine the potential economic benefits of unlicensed combined with the propagation characteristics of 700 MHz.

0 thoughts on “Frontline on the Backburner – Time for the Congress to Rethink Spectrum Sale!

  1. We wholeheartedly agree with what the WSJ reported in its Jan 9th edition:

    “Frontline’s plan was to use the spectrum to build an advanced wireless network for first responders that could also be shared with commercial users. With Frontline out of the mix, it isn’t clear who will win the slice of frequencies the FCC has designated for a hybrid public-private wireless network.

    Large incumbents like Verizon Wireless, a joint venture of Verizon Communications Inc. and Vodafone Group PLC, and AT&T Inc. are in a good position to get the spectrum if they want it. But once they control it, they would have to negotiate with public-safety agencies to build a network that will work with their radios, something the two telecom giants may not want to get mired in. An AT&T spokesman and a Verizon Wireless spokesman declined to comment.

    If no players come forward to build an advanced network for first responders, it would be a significant setback for the FCC and an embarrassment for its chairman, Kevin Martin. Improving public-safety communications has become a higher priority in Washington since the Sept. 11 terrorist attacks and Hurricane Katrina, when communications miscues hobbled public-safety efforts.”

    So we wonder if any of the other 266 potential applicants who are all seeking to bid for the “beachfront property” 700 MHz auction will be willing to build out a new network and share it with municipalities for public safety applications. We will know in a few weeks – the auction is scheduled for January 24th.

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