FCC undermining its own ‘straightforward and easy’ spectrum standard

[Commentary] The Federal Communications Commission’s apparent addition of another layer of complexity to its upcoming 600 megahertz spectrum auction is rather startling.

The new rules would restrict the amount of spectrum on which AT&T and Verizon could bid. If it looks like the spectrum available from the reverse auction is 60 megahertz, for example, the two firms might be able to bid on three of six blocks. If 70 megahertz is available, then four out of seven. Clear, right?

But it’s far worse than it appears because the new wireless technologies -- such as 4G LTE -- work best with wider spectrum bands. And the FCC’s proposed limitation would dramatically reduce the odds that AT&T or Verizon would actually get a wide enough band to make it worth their while to bid and spend scarce capital.

The FCC’s stated rationale for all this nano-management is to steer spectrum to non-AT&T-and-Verizon firms to compete with AT&T and Verizon in rural markets. But other recent policies, such as the mandated data roaming order that forces firms to share their networks at below market rates, have discouraged real facilities-based rural competition. And now the auction policy could reduce the available rural capacity of AT&T and Verizon upon whose networks the data roamers roam. There’s not even a guarantee -- far from it -- that the number three and four mobile firms, Softbank-Sprint and T-Mobile, will even make a bigger rural push. More likely the rural talk is a PR strategy designed simply to prevent their rivals from obtaining spectrum and to lower their own price of acquiring it -- likely to be used in urban and suburban areas.

[Swanson is president of Entropy Economics]