On Friday, the Ad Hoc Public Interest Spectrum Coalition (PISC), of which Public Knowledge is a member, made a detailed filing at the FCC addressing a number of the arguments made by incumbent telephone and cable companies against the rules that PISC has proposed for the upcoming 700 MHz spectrum auction. Not surprisingly, these companies are opposed to rules that would promote more broadband competition, including open access, anonymous bidding and limitations on incumbent participation. Also not surprisingly, their arguments against these pro-competitive rules are based on misconception and speculation.
Here are some of the arguments we addressed, and our responses:
• Open Access is not a feasible business model and imposing an open access requirement will drive potential bidders away and ultimately reduce auction revenue. The first important point here is that an open access, wholesale business model is not only feasible, but already exists as a profitable business model. Mobile Virtual Network Operators, such as Virgin Mobile, already lease spectrum wholesale from large incumbent spectrum holders, like Sprint (as in Virgin Mobile's case). Secondly, there is significant demand for an open network that can provide spectrum wholesale, so that wireless innovators can provide customers with new services. This demand makes open access spectrum valuable, and therefore attractive to bidders.
• It is sufficient to have open access on the white spaces. To the contrary, there are no substitutes for open access on significant spectrum in this band. The suggestions by some that the possible availability of unlicensed broadcast “white spaces” obviates the need for open access should be summarily rejected. The FCC is currently in the process of determining exactly what is to be done with the white spaces; open access on this spectrum is far from certain. Additionally, and perhaps more importantly, providing open access on licensed portions of the spectrum gives wireless service providers seeking to enter the market the certainty of licensed spectrum. This certainty allows them to guarantee quality of service to their customers, and ultimately facilitates competition in the wireless broadband market.
• Spectrum caps and bidding credits reduce auction participation and auction revenue. Spectrum caps and bidding credits used in previous auctions facilitated the entry of small businesses into the wireless market, enhanced auction revenue, and increased competition. Close analysis of the LMDS Auction, which incumbents cite to support the proposition that incumbent exclusion leads to reduced auction revenue, actually shows that the exclusion of incumbents in the LMDS auction did not have any practical effect on auction revenue.
• Large license blocks will limit the ability of smaller carriers to acquire spectrum. The adoption of anonymous bidding, application of spectrum caps to the largest licenses, and designating the largest licenses as the “open access” licenses will mitigate the advantage the auction method gives to the largest incumbents and will allow smaller bidders to win the spectrum they need.
• The advantages of open bidding are greater than the need for anonymous bidding. No party opposing anonymous bidding has submitted any substantive arguments to refute the findings of Greg Rose that incumbents have used open bidding in previous auctions to block potential competitors. Additionally, the argument by smaller bidders that they must carefully tailor their strategies to avoid direct confrontation does not withstand scrutiny. If bidding is anonymous, then incumbents will not know who is bidding on which license and will, therefore, be unable to retaliate against smaller bidders.
A copy of the comments is posted here.