Easy There on Adelstein

by publius

Matt Stoller's heart is in the right place, but I think this attack on FCC Commissioner Adelstein is misplaced. This requires digging into the nitty-gritty of the 700 MHz spectrum auction, so I'll describe it after the jump for those interested.

As I described earlier, one of the big questions in the upcoming auction is how big the "pie slices" should be. The bigger the blocks are, the better for the big boys. That's because smaller companies and start-ups can't afford buying huge chunks of spectrum -- largely for the same reason you can't afford buying huge stretches of beachfront property. I'll spare you the details, but right now there is one truly massive block being considered by the FCC -- the 20 MHz "D" block, which is twice as large as the next largest block being auctioned. (There are other, more complicated proposals that would add 2 more MHz, making it a 22 MHz block.)

One of the proposals on the table is to split this D Block into 2 smaller blocks. However, a separate proposal is to keep the big 20/22 MHz block in place and to make it a national license. In other words, there would be a single national licensee for the entire swath of spectrum. (Alternatively, you could license 20 MHz of spectrum to different carriers in different regions -- think of an x/y axis for these two different values: (1) range of spectrum; (2) geographical license area). Accordingly, this is a double whammy -- it's a huge block coupled with national geographical scope (i.e., one company gets it all). We're talking very big bucks here.

Adelstein, to his credit, expressed skepticism of this proposal because he knows the big boys -- i.e., Verizon -- would "win" this spectrum in a fire sale because few others could bid. I read this as him favoring splitting the 20 MHz D Block, which would be good. That said, a group of Internet companies calling itself the 4G Coalition has (foolishly) come out in favor of this national 20/22 MHz proposal. Stoller block quotes from this article:

A group calling itself the Coalition for 4G America has been aggressively lobbying for a 22 megahertz block of spectrum with a national license to be auctioned off. The coalition includes the likes of Google Inc., Intel Corp., EBay Inc. unit Skype Inc., and satellite television companies EchoStar Communications Corp. and DirecTV Group Inc.

It argues that such a chunk of spectrum would be necessary in order for a bidder to launch a significant challenge to the dominant cable and phone company broadband providers.

Stoller then adds:

I don't want to knock Adelstein, who has generally been a friend, and imply bad faith when it's not warranted. I just don't really get his position and why he's reluctant to help create genuine competition for the wireless industry. There are hundreds of billions on the line for various tech companies, so it's pretty clear there will be some business interest in this chunk of spectrum.

My take is that the 4G Coalition is playing the role of useful idiot. There is no way that a bunch of Internet companies with no experience with spectrum is going to outbid Verizon for this national license. What the 4G Coalition is accomplishing, however, is helping to justify a set of pro-incumbent auction rules that will help Verizon gobble up more spectrum for cheap (relative to its value). That's why Chairman Martin -- a wholly owned subsidiary of Verizon -- has expressed support for this proposal under the guise of introducing a new national competitor.

Adelstein is the voice of reason here people.

[Again, same legal disclaimer as my earlier post.]

Comments

[jrudkis]

Maybe this is a way that content providers are taking a swipe at the current service providers who were trying to charge them for carrying their content (if I recall a previous post correctly).

[liberal japonicus]

Does Verizon have so much more capitalization than Google, or are there some intricacies to the bidding process that mean that Google would likely lose?

[OutSourced]

A single dominant national block would give the winner a near monopoly over new, enhanced national services. If few can bid on it, it would likely be licensed at low value despite being potentially the most profitable property on the beach. That seems to make no sense for taxpayers, and to be an irrational way to allocate spectrum.

It would seem logical, I suppose, to an administration that prides itself on putting extraction industry lobbyists in charge of regulatory agencies overseeing their "former" industries. It would also help explain why so many telecomms companies have been willingly to supply their customers' data to Mr. Bush's domestic spying program(s) without a peep. Kinda redefines the notion of "fee for service". I wonder how that's disclosed in the fine print?

[Slartibartfast]

I think it's a really bad idea to bust up the spectrum into extremely narrow blocks. I don't think there's a well-defined threshold between big enough and too small, but I think it's pretty clear (speaking qualitatively, here) that you don't want to portion spectrum out in 1 Hz increments (MUCH too small), nor do you want to portion spectrum out in chunks whose width is 20% of centerband (too wide). The subdivision being discussed here is 0.3% of centerband, which I think might be on the small side.

If one assumes that the spectrum will be used for CDMA cellphone communications modeled on CDMA2000, then the LSB of spectrum should be roughly 1.25 MHz, but I'm not sure that's a good assumption. That chunk of spectrum is only enough to support 40+ simultaneous conversations; it might not be cost-effective for anyone to support a single chunk of spectrum that small.

[Grocer]

The money the auction generates and who gets the spectrum isn't really that important in the long run. What's important is what the spectrum is used for and how. It we want to put forth a true wireless broadband option, then we have to grant a very big chunk, or it simply won't work. If we don't want that, then it doesn't matter, because normal voice operations don't require that much space.

I wouldn't assume that a "bunch of internet companies" have no chance of outbidding Verizon if that's their goal, the money isn't going to be an issue.

Personnally I'm in favor of Frontline Wireless's plan. Highest bidder on 10 MHz gets an additional 12 MHz free out of the 24 currently allocated for public safety. The network is built out using public safety standards (which are more rigourous) and network access is offered to governments at cost, however much they need in emergencies, and the rest is sold wholesale. Makes tons of sense to me to seperate the network opperator from service providers.

[Eric Martin]

You've officially "jumped the wonk" p-diddy.

[hilzoy]

We like it when people jump the wonk ;)

[Eric Martin]

Oh, I meant that as an unvarnished compliment!

I aspire to, myself, one day mount some particular mortocycle of wonkery and leap over the benighted masses of sharks beneath.

Alas, all I have is this rusty old bicycle.

[Gromit]

I think you mean water skis, Eric.

[Eric Martin]

Oh sweet jesus, I'm doomed.

[publius]

uninformed, pop psychology will always be my first love.

[Eric Martin]

uninformed, pop psychology will always be my first love.

And we liked you for that...

[Harold Feld]

This is good as far as it goes, but the picture is much more complex. In particular, I disagree with your charcterization that those supporting large license blocks are either Bellheads or their "useful fools."

My rather lengthy discussion at: http://www.wetmachine.com/totsf/item/825