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Friday, June 08, 2012

Verizon Spectrum Proposal, Its Opposition, the FCC and Markets

It’s troubling and disconcerting to see leading businesses send flip-flopping messages to policymakers on major issues that affect the economy, including small businesses.

Consider the reaction to a proposed deal for Verizon Wireless to purchase wireless spectrum licenses from a group of cable companies.

As The Wall Street Journal reported in early December 2011, “The sellers—Comcast Corp., Time Warner Cable Inc. and Bright House Networks—acquired the spectrum in a government auction in 2006 and now will turn it over to the country's biggest wireless carrier at more than a 50% markup. While cable companies have dabbled with wireless, the spectrum has largely sat around unused, prompting years of speculation about the industry's intentions.” For good measure, “In an important twist to the deal, Verizon Wireless and the cable companies agreed to sell one another's products—a rare cooperative arrangement for two industries that compete fiercely for telephone, television and broadband customers.”

It’s hard to see how this could be anything but positive for consumers given that unused spectrum will now be used.

Keep in mind the need for expanded and improved allocation of spectrum, and how vital that is for the U.S. AT&T CEO Randall Stephenson made key points at a June 6 Telecommunications Industry association event. As reported, “He said that other countries, much smaller than the U.S., have made getting more spectrum into the pipeline a priority. For example, Japan is working to get an additional 400MHz of spectrum in the hands of wireless operators. Germany recently auctioned off 350MHz. The U.K. and France have 310MHz and 250MHz respectively of spectrum earmarked for public use. ‘By 2013 demand [for wireless data services in the U.S.] will outstrip supply,’ he said. ‘This isn't a problem that is six to eight years from now. It's happening now.’”

But other Verizon competitors apparently don’t see the need in the same way, namely, Sprint, MetroPCS and T-Mobile.

Most striking in its opposition to the Verizon deal with cable firms is T-Mobile. When pushing to be sold to AT&T, T-Mobile obviously argued that the merger’s resulting increase in market share and spectrum control would be beneficial for consumers. Now, after the AT&T and T-Mobile merger was killed by the federal government, according to T-Mobile, Verizon looking to purchase this spectrum is a negative, bad for competition and “against the public interest.”

For good measure, there have been reports that T-Mobile and MetroPCS are considering a merger. If that comes about, it’s pretty obvious that T-Mobile and MetroPCS will be arguing vigorously that such a merging of spectrum will be just great for all concerned.

Of course, Sprint would be in the same contradictory position in the case of it trying to purchase spectrum or merge with another provider.

In the end, there’s no doubt that moving spectrum off the sidelines and onto the field of play would be positive for consumers. And rather than listening to the too-often shifting and contradictory declarations of competitors claiming otherwise, the FCC’s lone focus should be on the consumer, including entrepreneurs, small businesses and their employees.

After all, few have benefited more from the mobile technology revolution than small firms, with tremendous gains in efficiency and the ability to better serve customers. But as demand for spectrum rises, and with a spectrum crunch on the horizon, providers desperately need increased availability, and the government needs to let the market allocate such spectrum to its best uses.

Quite simply, unnecessary regulatory interference hurts innovation and investment. Government delays in approving this and similar spectrum deals mean delays in benefits for consumers, again, including small businesses. Approving Verizon’s agreement to buy AWS spectrum from Time Warner Cable, Bright House Networks, Comcast and Cox Communications should be a no-brainer for the FCC.

The FCC needs to put aside complaints from other firms in the industry looking to use government to hinder competitors; move away from a distrust of the workings of the market; and allow market participants to allocate spectrum in the robustly competitive telecommunications industry. Market participants should be free to invest, innovate, and compete, with consumers, not politicians or their appointees, deciding that works best in the end.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is “Chuck” vs. the Business World: Business Tips on TV.

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