Some Clarity on the Spectrum Crunch

CNN Money began a weeklong series today about the reality and implications of the growing demand for wireless spectrum.

Congress took a big step toward addressing the issue last week when it authorized the Federal Communications Commission to begin re-allocating spectrum from various current licensees, including the U.S, government and private broadcasters, but that process could take years.

What’s notable about the CNN Money article is that it is one of the few MSM pieces attempts to put spectrum policy in the context of the FCC’s long history of attempting to manage competition. It also said that the spectrum shortage is at the root of slower data speeds, data throttling, and rising prices for wireless data plans, not service provider monopoly, inefficiency or greed, two common accusations heard in the policy debate,

Here’s an excerpt:

How did we get here?

The number-one biggest driver is consumers’ insatiable thirst for e-mail, apps and particularly video on their mobile devices — anywhere, anytime. Global mobile data traffic is just about doubling every year, and will continue to do so through at least 2016, according to Cisco’s Mobile Visual Networking Index, the industry’s most comprehensive annual study.

The iPhone, for instance, uses 24 times as much spectrum as an old-fashioned cell phone, and the iPad uses 122 times as much, according to the Federal FCC. AT&T says wireless data traffic on its network has grown 20,000% since the iPhone debuted in 2007.

“We got into this principally because technology and demand exploded at a rate that nobody had anticipated,” says Rory Altman, director of technology consultancy Altman & Vilandrie.

Another catalyst is the way the U.S. government allocated spectrum. The bands that wireless companies hold were broken up into small chunks across various markets, which was helpful in increasing competition in the 1990s.

But the patchwork nature has proven problematic for new technologies like high-speed 4G broadband. Bigger swaths of uninterrupted spectrum provide the larger amounts of bandwidth needed for delivering faster speeds.

Author David Goldman is generous. While the goal of carving up spectrum into slots was greater competition, there was no influx of “mom-and-pop” wireless companies that the FCC anticipated at the time. Faced with huge capital costs of buildout, smaller companies eventually sold their spectrum to larger players. The irony is while there is a competitive wireless market, the FCC’s vision of eight to ten facilities-based carriers per market never materialized. Capital markets simply were not going to fund this big an overbuild.

What’s worrisome is that FCC remains undeterred, and seems bent on doing the same thing in the next round of auctions–reserving chunks for “new technologies” withe serious performance issues (LightSquared anyone?) or new entrants who have little or no funding to build out regionally, let alone nationally. We’ve been down this road before. It doesn’t work. Consumers will be served best if the spectrum can go to the companies that can 1) actually afford to pay for it; 2) know how to engineer wireless networks and 3) have the resources to get it into service quickest. And, yes, there are more than just two.