Catherine Cross' Research Paper

2008 Wireless Broadband Spectrum Auction

The purpose of this paper is to demonstrate how the Federal Communications Commission ("FCC") reshaped the telecommunications landscape and upheld the public interest in favor of the consumers by providing valuable public safety communications, advancing wireless services, and promoting competition when it held a non-discriminating auction selling off a large portion of wireless broadband lines. This portion was made available as a result of Congress mandating that over-the-air broadcasters change to digital broadcasting. Digital transmissions of telephone broadcasts require much less spectrum than the analog broadcasts, and thus, by requiring over-the-air broadcasters to change to digital broadcast, Congress was to make available a large portion of unused spectrum which was auctioned off at the beginning of this year (FCC, 2008, p. 1) The available spectrum, in the 700 MHz band, made it possible for new nationwide broadband internet providers to compete in the auction with the existing incumbent telephone and cable companies, AT&T and Verizon (Korzeniowski, 2008, p. 1). The spectrum auction provided an excellent opportunity to advocate competition, diversity, and public access. In the following pages, I will provide the benefits of the wireless broadband, present broadband history, and the requisite rules and regulations that were followed during the spectrum auction.
The benefits of digital broadcast television are very apparent. Today, our world reflects more of a “global village” because communication technology allows for a fast and efficient spread of information to occur instantaneously from one country to another. As quoted from Al Gore, the internet is an “information superhighway” comparing federal network of interstate roads with the enormous amount of information easily attainable for consumers (Aufderheide, 1999, p. 43). Wireless broadband is a rather new technology providing high speed wireless internet and data network access over a wide area. Wireless broadband is portable, with no fixed location (Aufderheide, 1999, p. 266). Its mobile capability is accessed through a personal computer ("PC") card, lap card or USB equipment that connects to a PC or laptop with internet capability via cell phone towers (FCC, 2008, p. 1). Hence, this connection is stable in almost any area that could receive a strong cell phone connection. Most broadband wireless services are estimated to have a range of 30 miles from a tower (FCC, 2008, p. 2). Providers of this service are known as WISP’s (wireless internet service providers), who conventionally only supplied wireless broadband to underserved rural areas. (FCC, 2008, p. 1)
Broadband can carry all kinds of services, from video to voice to data, benefiting consumers in a multitude ways (Fitchard, 2004, p. 1). The 700 MHz spectrum band signals travel about four times faster than those bands used by other wireless and electronic industries today. It is used by new carriers to promote up and coming technologies like 4G wireless networks, WiMax, and advance the already existing 3G wireless services of today (Reardon, 2007, p. 2). The band supports newer technology and inspires technology yet to be imagined (Fitchard, 2004, p. 1). As mentioned above, wireless broadband provides an easy and accessible alternate mode of communication by challenging its wired counterparts, DSL and cable companies (Aufderheide,1999, p. 266). To operate, DSL (local telephone provider) and cable companies require a wire connection between the outlet and the computer for internet access. This wired access to the internet is limited to one spot, impeding one's mobility (Aufderheide, 1999, p. 266). The 700 MHz range enables faster deployment of internet connection speed as compared to cable modems, and at a less cost because there is no need to have a fixed wire in every home (Aufderheide, 1999, p. 266). This extends internet availability to Americans even in the rural sections of the country, who at best receive internet through dialup (Lance, 2007, p. 2).
During an interview Less-State, a noted economist, continually remarks about the benefits wireless technology promotes. “Wireless technologies use spectrum. A lot of people believe that this is an extremely important distinction. Is there any reason to treat this spectrum differently than the thousands of other inputs used to produce communication services, or indeed other goods and services?” (Aufderheide, 1999, p. 267) “Absolutely not. Spectrum may be scarce, but with the possible exception of bad ideas, all inputs are scarce” (Aufderheide, 1999, p. 267)
Within the 700 MHz band the 60 MHz spectrum is of immense importance (Meyers, 2009, p. 1). This 60 MHz spectrum can transmit signals between transmitter and receiver without a clear, direct line of sight. This is beneficial in urban areas because signals can pass through walls and city buildings (Aufderheide, 1999, p. 266). Likewise, there would not be a problem in sending or receiving long distant messages in isolated rural areas (FCC, 2008, p. 2). Another benefit is that the installation of a device, like a dish, in each individual home would be unnecessary. The technology is user friendly and has no constricting boundaries, allowing access for all (Labaton, 2008, p. 2). As stated by the Chairman of the FCC, “The spectrum we are offering is going to be the building blocks for the next generation of broadband services ... it will allow a wireless platform to be another competitor in the broadband space” (Labaton, 2008, p. 2).
The characteristics of the 700 MHz band are interesting. Within the 700 MHz spectrum, there are two sections known as the “lower 700 MHz band” and the “upper 700 MHz band” (Lance, 2007, p. 2). The lower band refers to channels 52-59, and the upper band refers to channels 60-69. The upper band is reserved for public safety frequencies and new, upcoming technologies (Lance, 2007, p. 2). The frequencies were divided into small and large regional sections. Smaller geographic sections, areas where population is not dense, would want smaller blocks of spectrum. The larger geographic regions, like a conglomerate of cities, would want and require larger sections of the spectrum to support a large audience (Lance, 2007, p. 2).
Historically, the FCC has been the government agency responsible for regulating the wireless broadband spectrum. Initially, the government agency listened to the various interested parties, and then handed out bandwidth to those companies it determined would deliver the best results in the long run (Korzeniowski, 2008, p. 1). It was also typical at this time for the government to mandate certain frequencies only to be used for certain technologies. In 1994, the prior process of regulating it changed, and wireless carriers were allowed to bid on the items that they desired (Korzeniowski, 2008, p. 2). In 1996 the United States Congress authorized the distribution of an additional broadcast channel to each broadcast television station in order to enable them to start a digital broadcast channel while simultaneously continuing their analog broadcast channel (Korzeniowski, 2008, p. 2). In the transition to digital television, the FCC contemplated the auction in 1997, by loaning broadcasters the spectrum that would become part of the 700 MHz auction (Labaton, 2008, p. 2). Realizing that the incumbent companies, AT&T and Verizon, would be dominant in such an auction, special interest groups spoke up in view of the fact that the large portion of vacated spectrum to be auctioned could make it ideal for a new, third nationwide broadband internet provider. The government wanted to ensure that customers would benefit no matter who won the auction for the vacated spectrum (Labaton, 2008, p. 2).
On August of 2006, the FCC requested comments on changes to their 700 MHZ policy. The new spectrum became available in 2006, when the government set the date for the transition from analog to digital TV that would occur in February of 2009. The switch created much unused valuable spectrum desperately sought after by companies (Public Knowledge, 2008, p. 1).
It was obvious that wireless broadband was seen as an alternative service to DSL (local telephone provider via a direct service connected line) and cable, as well as initiating the rise of competing companies wanting to sell broadband service challenging the current duopoly of broadband providers in the market, i.e., AT&T and Verizon (Reardon, 2007, p. 2). Even today, most Americans access broadband through either the local telephone provider or the local cable provider. Both providers had been able to charge customers high rates, and maintain them due to a lack of competition (Fitchard, 2004, p. 3). For instance, “AT&T was charged with the upstarts of cream skimming - taking the high dollar clients” and only providing service to high-dollar or low-cost customers to service (Aufderheide, 1999, p. 22).
In April of 2007, the Public Interest Spectrum Coalition, a group of public interests groups who advocated for the creation of a third competitor for the upcoming auction, requested the FCC to adopt open rules, emphasized the need for a wireless wholesaler, and voiced changes to the bidding process to encourage diverse bids (Fitchard, 2004, p. 3). FCC agreed to entertain comments on the upcoming auction. In May of 2007, Presidential Candidate John Edwards urged the FCC to create non-discriminatory wholesalers. In June of 2007, 250,000 people called the FCC demanding access to the 700 MHz auction; the FCC held a hearing that same month. (FCC, 2007, p. 2) Multiple events occurred in July of 2007. Initially, Google sent a letter to FCC supporting open access to the auction. Google became a significant overseer in the process of determining the rules for the auction (Labaton, 2008, p. 3). Google campaigned for four specific rules they thought should be included: open applications, open devices, open services and open networks. In order to convince the FCC to adopt the rules, Google promised to place a bid on a spectrum at the minimum cost required by the FCC (Labaton, 2008, p. 3). Google’s actions spoke louder than their words. They realized that the spectrum they placed the minimal bid on would probably be outbid by another company. Nevertheless, it would still promote diversity and competition in a market dominated by AT&T and Verizon (Labaton, 2008, p. 3). Going up against these two powerhouses, Google earned respect and a positive repertoire trying to gear the market towards the consumers' benefit and public interest.
Thereafter, the FCC chairman, Mr. Kevin Martin ("Martin"), began a plan for open access to the auction. Not surprisingly, AT&T filed warnings with FCC that open access rules would "turn the clock back" on the incumbent telephone and cable companies, i.e., AT&T and Verizon (FCC, 2007, p. 2).
Public interests groups requested FCC to integrate "four principles" which they felt would successfully allow open access to participants other than AT&T and Verizon. Google informed the FCC that it would enter the auction with a guaranteed bid of $4.6 billion if the auction was structured to encourage open access (Labaton, 2007, p. 3). The FCC discussed and considered the "four open access principles." And, lastly, the FCC voted to keep two of the suggested four access principles. In August of 2007, the FCC sought comments on the rules for the 700 MHz auction, and set the date for the auction to be in March of 2008 (Labaton, 2007, p. 3).
Because two of the biggest bidders/players in the 2008 auction were Verizon and AT&T, and both had nearly complete control of their market, the FCC created rules for the 2008 auction challenging the incumbents' overpowering existence (Reardon, 2007). Aware of the current duopoly controlled by AT&T and Verizon, the FCC incorporated and encouraged competition by implementing two of the above four suggested rules to determine a third, open alternative to the cable and telephone internet duopoly (Labaton, 2008, p. 3). Previously, companies like Verizon and AT&T had paid a “blocking premium” allowing themselves to rule a market without newcomers intruding in their territory. The FCC foresaw this happening once again, and came prepared to the auction with preventive measures (Fitchard, 2004, p. 2). The FCC mandated the auction of all bidders would remain anonymous; presuming that if the bidders could not identify one another the prior signaling blocking behavior FCC had previously experienced would become more difficult (Public Knowledge, 2008). In addition, the names of the leading bidders would not be divulged. At the end of the day when the commission posted the leading bids, only in the amount bid would be posted, without the names of the leading bidders (Labaton, 2008, p. 3).
The government raised close to 20 billion dollars by selling off wireless bandwidth (FCC, 2008., p. 1). Without this auction, chaos would have ensured if devices had selected their own spectrum. These regulations imposed on the auction demonstrated the importance of the political process and its guiding role in establishing new market conditions for communications, media, and information services (Aufderheide, 1999, p. 103).

Catherine M. Cross
Works Cited

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