Spectrum Auction Decision -- The Trailer

by publius

It appears that the FCC’s spectrum auction decision is coming out tomorrow. Here’s a brief preview of some things to consider. I’ll obviously have more to say after the decision comes down.

First, some of the most important industry issues that the Commission will formally decide tomorrow aren’t getting much attention. Open access and Google are sexy beasts and all, but the real action is largely elsewhere. Issues like the public safety communications network, spectrum block size, scope of license, and small entity auction credits are arguably more important to the industry than a watered-down open access requirement.

The headlines, though, have focused on open access and (swoon) Google. We don’t know exactly what’s been decided, but you should be skeptical of the supposed “open access” requirements that Chairman Martin has apparently adopted. Most obviously, the two companies that theoretically have the most to lose from open access – Verizon and AT&T – have come out in tentative support of Martin’s proposal. That should send off big loud Drudge-like sirens in your head.

The devil here is in the details, but there are a few possible forms that a toothless open access requirement could take. First, the “open access” proposal will apply only to one piece of the spectrum and not to the entire spectrum holdings of a given company. Wireless companies use different spectrum frequencies to bring you service. For instance, when you use national carriers’ networks, you don’t notice it but your service can jump around from, say, 800 MHz to 1950 MHz. Thus, the open access spectrum is only one small part of the frequency national carriers’ customers use. So, keep an eye out for disclaimers in the FCC decision saying that open access doesn’t apply for carriers with additional spectrum holdings because it would screw up their network. (Or more generally, look for some provision that allows owning other spectrum to water down the open access requirement)

A second possibility is that the big boys realized that device open access in the wireless world doesn’t get you very far without some form of net neutrality. For instance, the Post reported:

In a last-minute policy shift, Verizon Wireless said yesterday that it would support a plan requiring a portion of airwaves to be available to any wireless device. But the company that builds the network on those airwaves, Verizon said, shouldn't have to guarantee that all applications, such as games and videos, will work properly.

The whole point of buying certain wireless devices, though, is that you want to use certain applications. Thus, if you can block applications (e.g., VoIP, p2p), the device itself doesn’t matter as much. For all practical purposes, the walled garden will live on.

That’s a key difference between the open access of today and the Carterfone open access of yesteryear (1950s and 60s). Decades ago, allowing devices to be attached to the network (which is what the Carterfone/Hush-a-Phone decisions required) just meant you could buy your own phone. It didn’t mean you could access services or applications that are potential rivals to the services your phone company (e.g., VoIP). Even after Carterfone, you still bought phone service from AT&T -- you just got to attach a groovin’ Elvis phone if you wanted to.

Bottom line -- keep an eye out for kabuki. The most likely scenario is that the open access requirement will, Warner-like, accomplish nothing but defusing political pressure.

[UPDATE: Via Communications Daily, I found this letter (pdf) from Verizon to the FCC stating that they oppose open access after all. Verizon apparently only meant to say that if the Commission adopts device open access, it should not necessarily net neutrality-style open access. Hard to know whether this was just a miscommunication or some backtracking. (It was originally reported in the WSJ as coming from the CEO, but sometimes CEOs don't dive into the details. So, who knows.

For what it's worth, I thought it was odd for Verizon to support open access publicly because it all but confirms that the requirement does nothing. Verizon is generally far better at these little PR games (e.g., strategically claiming to lose while winning), so someone screwed up here.]

Comments

[Jack Robles]

Let me begin by saying that I like open source software (I use linux at home) and violently hate proprietory formats (as in, for example, ms-word documents.) So I am sympathetic to the idea of open access, but I am quite uncertain about it. A lot of that has to do with ignorance, perhaps someone can answer some questions for me.
One of the reasons that the spectrum is being auctioned off, to my understanding, is that different devices interfere with each other. Hence by giving some company proprietory rights over some bandwidth, you allow them to assure that the devises used on that bandwidth do not create problems for each other. How is this issue going to be resolved?
What exactly is open access supposed to mean? From Publius's post, I have the idea that it might possibly mean that this peice of the spectrum would be open both to users and providers. But if that is the case, why is this peice of the spectrum being actioned off? Why isn't it simply put aside with government ownership? If any provider can use it, why would anyone want to buy it? How is the buyer supposed to recover the cost of purchase (or make a profit?)
Does Open Access mean, on the other hand, that it is open only to users? Does this simply mean that the provider must make the specifications for use of this peice of the spectrum available to all device manufacturers? If so, then clearly there is some benefit from getting competition in devices. However, the provider is going to have an incentive to extract all the benefit from being on the open access portion of the spectrum. I would imagine that this will simply mean that one would be able to buy open access services from the provider which would allow one to use a fancier/specialized device at a much higher price than one would pay to use the same provider, but on that provider's closed portion of the spectrum. Does this sound accurate?
thanks for any information
Jack

[publius]

Jack - there's a lot packed in there but I will answer it later tonight as best i can (if others don't). I tied up for the rest of the afternoon

[OCSteve]

Publius: You are at your best here IMO. I really enjoy your posts on this topic. Factual, less snark, important to all - I appreciate them.

I am quick enough to gripe at you, I have to make the effort to acknowledge you when you are right on. Actually it is not an effort but a privilege. A good writer who really knows h/is/er topic is always a pleasure. You have informed me a great deal on this topic and I don’t even find the knowledge ‘tainted’ ‘cause you are one of them.

I appreciate your posts here.

[publius]

thx ocs - very kind words and much appreciated