Rescue Orphan Works

700 MHz Spectrum Auction

700 MHz Spectrum Auction

Digital transmissions of television broadcasts require much less spectrum than analog broadcasts. As a result, when over-the-air broadcasters change to a digital broadcast as mandated by Congress, they no longer need large areas of spectrum that they have traditionally controlled. This auction involves a large portion of that vacated spectrum. The characteristics and location (in the 700 MHz band) of this spectrum make it ideal for the development of a third, nationwide broadband Internet provider that could compete with the powerful incumbent telephone and cable companies which control 96% of broadband lines in this country.

Why are auction rules important?

This spectrum auction represents an excellent opportunity to reshape the telecommunications landscape in favor of consumers. However, entrenched telephone and cable companies are concerned that such a change could destroy their communications duopoly. In order to make sure that customers benefit no matter who wins the auction, it is critical that all parties are bound to simple auction and service rules that will provide the best opportunity for new broadband competition.

  • Open Access
    An open access service rule would require winning bidders for half of the spectrum to make access to that spectrum available to third parties at wholesale rates. This model has a proven track record — it led to an explosion of competitive Internet Service Providers in the 1990’s. It is also the model adopted by those countries that are far ahead of the United States in terms of broadband speeds, prices and services.

    The open access model requires no complex arrangements or new technology. It would simply require the licensee to sell interconnection to third parties at a gateway in the network, which would permit any number of competitors.

  • Network Neutrality/Right to Attach
    All licensees would be required to operate their networks in a manner that “protects the consumer’s right to use any equipment, content, application or service on a non-discriminatory basis without interference from the network provider.” This protects against the licensee giving favorable speeds or quality of service to content, applications and services in which it has a financial interest. It also ensures that the consumer can attach any non-harmful equipment to the network. The FCC’s 1968 Carterfone decision mandated this attachment principle for wireline networks, but it has yet to be extended to wireless.

  • Fair Bidding
    The bidding patterns of recent auctions demonstrate that communication and collusion between bidders enable the largest companies to lock out potential new entrants and keep prices low. The best way to prevent such anticompetitive behavior is through anonymous bidding — if bidders cannot identify one another, signaling and blocking behavior become more difficult.

  • Limits on Incumbent Eligibility
    The best method for ensuring that the spectrum is not simply bought by incumbent broadband providers is by limiting their eligibility to bid — either through a flat prohibition or spectrum caps. The 1994 PCS auction had such caps and generated significant revenues. As an alternative, the FCC could give a bidding credit to new entrants.

  • “Use it or Lose it”
    Winning bidders should not be allowed to simply let the spectrum lie fallow. “Warehousing” may be particularly attractive to incumbents who do not want to compete with their own wireline broadband services. Thus, rules must ensure a timely build-out and make unused spectrum available for other unlicensed and other uses.

  • Pro-Competitive Band Plan
    The FCC should adopt band plans that allow competitive national broadband providers to achieve the necessary economies of scale. In order to achieve this goal, the auction must be structured to maximize the number of large spectrum blocks in the upper 700 MHz band.

700 MHz Who’s Who

  • Public Interest Spectrum Coalition (PISC)
    A group of public interests groups advocating for auction rules that encourage the creation of a third, nationwide internet broadband provider to compete with telephone and cable companies. The group is made up of Public Knowledge, Consumer Federation of America, Champaign-Urbana Community Wireless Network, Consumers Union, Educause, Free Press, Media Access Project, New American Foundation, and U.S. Public Interest Research Group.

  • AT&T and Verizon
    Legacy telephone companies interested in preventing the 700 MHz spectrum from producing a viable alternative to telephone and cable based internet options.

  • Federal Communications Commission (FCC)
    Government agency responsible for regulating spectrum and for operating the auction. The current FCC Chairman, Kevin Martin, has endorsed an “open access lite” position on the auctions.

  • Google
    Internet company who notified the FCC that they would participate in the auction if PISC ground rules were adopted.

Timeline of Key Events