Figures May Lie, but Words Deceive

This article originally appeared in the May 2012 issue of Next Gen Mobility magazine.

Sometimes, no matter the name of the law, the law’s name is a counter intuitive to what the law accomplishes. The Patriot (News - Alert) Act, The American Jobs Act, and Spectrum Incentive Auction all share an element of bath water staying with the baby.

In my speculating on spectrum, I get the logic of incenting the TV industry to give up the spectrum. After all, the revenue from over-the-air TV from a government perspective is not as valuable as the potential of selling spectrum.

The bill, according to an FCC blog:

·         codifies the voluntary nature of contributing spectrum;
·         authorizes the commission to offer a broadcaster at least three ways to contribute spectrum, giving an individual broadcaster not only an exit route previously unavailable but also multiple ways to receive auction proceeds to strengthen ongoing broadcast operations: a multi-station owner can contribute one or more licenses and use the proceeds to strengthen its other operations, and a broadcaster can receive auction proceeds for contributing spectrum and keep even the affected station on the air, through channel sharing or moving from U to V;
·         expressly preserves must carry rights for stations that choose to channel share; and
·         provides a $1.75 billion repacking fund to pay costs of channel changes by broadcasters who don’t participate.

Caveat Venditor

On the sale side, the National Association of Broadcasters is one constituency that is happy because its members get to act as sellers. An interesting possibility is that they act more like cable operators.

Here is an interesting speculation. It’s possible for some industry consolidation to happen as a result. About 20 years ago cable companies traded MSOs like baseball cards to get to the point where their footprints were more logical. We may see the same thing happen in the way the shared spectrum rules impacts the NAB members.

Caveat Emptor

On the buy side, CTIA (News - Alert) – the Wireless Association is excited to get access to this valuable resource. However, I am not sure the market has as many speculators as it has had in the past, particularly given the problems experience by companies like Clearwire (News - Alert), LightSquared and T-Mobile. 

The market has not been easy to penetrate even when spectrum was a key asset. In the past we have watched lots of spectrum gobbled up and put to little use. The dollar amounts I have seen for the estimation of the spectrum auction ($15 billion) are considerably less than were first projected in the balancing the budget effort ($50 billion). Like Metcalfe’s law, the value of the spectrum may be dependent on the number of addressable users. Value becomes very dependent on delivering a full block of coherent frequencies for the greatest reach.

Caveat Lector

That brings me to my final point. What is the public good? TV white spaces, or what Chairman Genachowski called SuperWiFi (hence the name of our conference), were touted as a great opportunity. Indeed, when you look at Wi-Fi and what has been accomplished by companies delivering products and not services, Wi-Fi has been a fantastic winner.

TV white spaces have the added opportunity in the fact that they would have less interference, greater range and a design in place that would allow for products and entrepreneurial solutions to be implemented. 

We are now at a point where the best we can hope for is a good implementation plan from the FCC (News - Alert). However, the market forces of the incentive auction can drastically reduce the opportunity for TV white space to deliver the SuperWiFi dream.  

When first looking at how to implement SuperWiFi, two strategies were planned for. The first was the use databases to track where spectrum was occupied. The second was to use cognitive radio to provide the devices the ability to shift frequencies when contention occurred. When looking at frequencies from a time division strategy, often we find spectrum use is bursty in the private implementations. Cognitive radio could have been a way of sharing spectrum, but at this point cognitive radio is not ready for commercial implementations. The database methodology is a precedent that should be protected and used in the implementation of the sale of the spectrum. We have too much spectrum idle not to put some strategies in place that make the purchase of the spectrum associated with real implementation. In theory, the rural implementations are safe for SuperWiFi, but to get to economies of scale, they need access to larger markets as well.

The FCC blog reports that “Our phones are already ringing with questions about how broadcasters can set their reserve prices, how the reverse auction will work, and the mechanics of channel sharing….We think that similar outreach can be useful as we tackle the tasks before us – we want to provide an avenue for exchanging thoughts about how to approach implementation issues and eliciting broadcasters’ thoughts about pitfalls to avoid…. By working together with broadcasters, we can make the incentive auction the effective policy innovation it has the potential to be.”

It’s clear they see the sale side. As for the buy side, let’s look out for the public good in the implementation.