Four-Dimensional Kabuki - The Latest from the Spectrum Auction

by publius

Congress and the White House are good at Kabuki. But they've got nothing on the big boys of telecom. In a fairly dramatic turnaround, AT&T is now supporting Chairman Martin's "open access" proposal for the biggest spectrum block. Why the change of heart? Did AT&T see a blinding light on the road to Damascus from the God of Competition and Good Policy -- "AT&T, AT&T, why persecutest thou me? Why dost thou locketh thy iPhone?"

Maybe. Or -- as I explained here -- AT&T has realized that the open access-lite proposal by Martin is actually a clever way to keep the spectrum block really big so that no one but fellow traveler Verizon will get it. At first glance, that seems strange because Verizon Wireless competes with AT&T Wireless (Cingular). But, AT&T has less to fear in many respects from Verizon than from new competitors, particularly ones that offer alternative, unwalled versions of broadband access.

I'm skeptical that wireless is much of a substitute for wireline broadband (cable, DSL), but Verizon will ensure that this vision never becomes a reality. In addition, even if the spectrum is destined to be used for complementary mobile broadband (cool, but not enough for you to cut your Internets cord at home), it's again better for Verizon to have the spectrum rather than some crazy who would unwall their garden.

Of course, what makes this high-level Kabuki is that Verizon will kick and cry even though they're winning by getting the big spectrum block undivided. (To me, the size of the blocks is where the real action is).

One last point. It's also possible, though, that I'm wrong and AT&T thinks that the open access provisions are a "poison pill" that will keep Verizon from bidding (it's less likely that AT&T will bid). I don't buy this though. I think they aren't crazy about Verizon getting it. But Verizon is the devil they know, and very often an ally.

[UPDATE: Harold Feld has other ideas. One is that AT&T is feeling the political heat, and has figured out that the Martin proposal doesn't do all that much. So, by embracing it, they get to look cool (even beyond the reflected glory of Steve Jobs) without giving much. John Warner: An excellent strategy. It's an interesting thought -- it depends on how much political heat AT&T is actually feeling. What makes it more plausible is that a Dem-controlled Congress isn't as much of a pushover. Plus, there's a real chance of a Democratic FCC just over the horizon.]

Comments

[Gary Farber]

"Or -- as I explained here"

A link there would go nicely.

[huh]

As I understand it open access is only proposed for the biggest blocks. Smaller players are saying that the open access makes the spectrum undesirable for their proposed uses. If that is true, open access may drive smaller and medium size entities to the smaller bands. Given the great propogation attributes, AT&T wants the spectrum. They may think that open access-lite is going to drive down demand enough so that they get the spectrum at a discount.

[publius]

that's possible -- some people are saying that. but again, the block size (I think) is key. what's driving smaller and medium players elsewhere is that they can't afford a spectrum block that big. That's exactly the point of keeping it big -- lowers demand and big boys get it at a good price. So you're certainly on to something re demand

i guess that open-access part is just a thumb on the scale -- it's not like, say, Alltel would otherwise bid on a block that big in the absence of open access.

[Nell]

OT (but media-related): Venezuela's RCTV returns as a satellite and cable channel, reaching 30 percent of households.

The non-renewal of RCTV's broadcast license limits access to its popular-entertainment-and-right-wing-news mix primarily among the poorest 70% of the population.

[hilzoy]

I just have to say that it is a wonderful thing to get regular posts on this, along with -- gasp -- comprehensible explanations. This used to be in the category of "gosh, I should try to understand this, but how??" issues. I like that it isn't any longer.

Thanks.

[Nell]

I'm grateful too, publius, lest my OT comment be misinterpreted.

[byrningman]

Is AT&T not supporting Martin's original proposal on the basis that it's now the best possible outcome - it's either that or an even worse (from their point of view) degree of openness that the IT industry is lobbying for?