Kabuki in the Spectrum Auction?

by publius

Big news on the 700 MHz spectrum auction front. FCC Chairman Martin has come out in support of so-called open access requirements on a slice of the spectrum up for auction. (Open access means different things, but here it refers to a sort of “net neutrality light” and the ability to attach devices of your choice, rather than the wireless carriers’ choice. For instance, under a pure open access regime, the iPhone would work on any carrier’s network, not just AT&T’s.)

At first glance, this sounds good. Open access – applications of my choice – free device attachment – all these are good things. But remember (always remember) that DC is the land of Kabuki, and Martin is no stranger to the dance. For Martin to come out in favor of open access is a little bit like Al Gore praising Exxon or House Republicans supporting unions. Something’s fishy. The good folks at Public Knowledge are skeptical, and I am too, though not really for the reasons they are.

We won’t really know anything until we see the proposed rules (which may come out this week), but there are at least two explanations that I can think of offhand. One is cynical, one isn’t. Starting with the latter, maybe Martin really believes in promoting competition. In particular, he thinks he will have scored a policy and political victory if Silicon Valley enters the spectrum auction. In this sense, the open access requirements would be an enticement for that community to enter the auction and thus the market.

The second explanation is that Martin is performing high-level Kabuki. As I explained in more detail in an earlier post, one key issue here is the size of the spectrum block. Martin’s proposed open access would apply only to the 22 MHz block (this is one of Public Knowledge’s objections). The 22 MHz block though is the biggest block by far. The upshot of auctioning a block that big is that only the national incumbents (AT&T, Verizon) have the resources to bid on it. [On an aside, this is a perfect example of how baseline rules are just as "auction-rigging" as more pro-competitive proposals added later in the game.]

One of the proposals by several commenting parties (including old clients of mine – legal disclaimer in the earlier posts) is that, to promote competition, you need to break this block up to allow more parties in. Keeping it at its current size plays into the hands of companies like Verizon.

Thus, what Martin might be doing is hiding the truly substantive decision – keeping the 22 MHz block intact – behind the more politically visible act of mandating a weaker form of open access while getting praised for doing so. Essentially, he may be saying to Verizon, “I can make sure you get the spectrum, but these limited open access provisions are the price.” That in itself deserves some credit, but the result is still that the big boys will get more spectrum and consolidation will continue. [On an aside, I don’t even know how open access would work in practice for carriers like Verizon who could shift users on to other spectrum not subject to these requirements.]

One assumption here is that Silicon Valley (and Google in particular) won’t actually take the jump and become a wireless provider. Frankly, and as I’ve already explained, I think they’re being played – they don’t have the first bit of expertise in this area, and both they and Martin know this. But they are being cited to justify keeping the spectrum block big.

Again, these are just preliminary thoughts. We’ll know more when the rules come out, probably this week.

[Update: I would also recommend keeping up with Harold Feld if you want to know the nitty-gritty of this stuff. Based on a WSJ I couldn't see, he raises a few different angles that I'll have to deal with later.]

Comments

[Free Lunch]

My guess is that wireless providers want the rule. Sure, they get a two-year commitment from their customers today, but they have to provide the cellphone. Maybe the providers are looking at Europe, where the customer buys the phone, and deciding that the cost of a little added churn is little enough that it is cheaper than the cost of new phones for all, but no one wants to exit this marketing merry-go-round first.

[washerdreyer]

Publius-

As a law-talking guy with knowledgeable things to say about FCC issues, how do you feel about a la carte cable?

[hilzoy]

washerdreyer: I know you asked publius, since he actually knows what he's talking about, but: oh how I wish there were a la carte cable! I have essentially no interest in sports: I could save money by ditching ESPN et al! All those golf, cooking, etc. networks: gone! Goodbye cartoons and MTV! Maybe, just maybe, someone would offer a 24 hour BBC feed, or even, dare one hope, more international channels -- I would love to have access to English al Jazeera, for instance.

God, it would be great.

[hilzoy]

oh, and best of all: no Fox! Why should I subsidize them? Inquiring minds want to know.

[Model 62]

access to English al Jazeera, for instance.

I'm a little surprised DHS hasn't already insisted that US cable companies carry English AJ on an a la carte basis.

It'd make it a lot easier to find those AQ sleeper cells.

BackOnT -- Publius: Can you explain a little further what the proposed Open Access rules will do for the consumer. Beyond the ability to use any device in the new chunk of spectrum, what do I get?

[xanax]

hilzoy! Do you mean to say you'd actually give up the poker channel? What on earth would you do for amusement??

[hilzoy]

xanax: contemplate my empty, meaningless existence, of course. Without the poker channel (is there a poker channel?), what else would be left to me?