Spectrum Policy Should Promote Competition
Spectrum Policy Should Promote Competition
Spectrum Policy Should Promote Competition

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    This is a guest blog post by Jon Peha. Peha is a professor at Carnegie Mellon University, an electrical engineer, the former Chief Technologist of the FCC, and the former Assistant Director of the White House Office of Science and Technology Policy.

    We all
    benefit when commercial companies compete for our business.  Competing in the cellular market is
    unusual in that it depends on access to a limited resource:  spectrum.  No firm can enter the cellular market in Pittsburgh (except
    as a reseller) unless it can get Pittsburgh spectrum.  Carriers already offering service there also often want more
    spectrum when they expand capacity, as adding spectrum allows them to expand at
    a much lower cost.  I hope that
    someday there will be a vibrant market for spectrum where firms can buy what
    they need when they need it, but at this point, spectrum suitable for cellular service can be hard to get.  You can wait around for government to
    take spectrum that is currently used for something else, reallocate it for
    cellular use, and auction it, but those auctions are infrequent and
    unpredictable.  You can try to get
    spectrum from a firm that already has some, but there are typically few holders
    of cellular spectrum in a given region, and they are all probably rival
    cellular carriers who would be happier if you just went away without offering a
    competing service.

    To make it
    difficult for one or two carriers to control so much spectrum that competition
    is undermined, the FCC has long imposed some form of limit on how much spectrum
    any firm can hold in a city. This has sometimes been a “spectrum cap,” which is
    a hard limit, and sometimes a “spectrum screen,” which is a soft limit; a
    transaction that pushes a firm’s spectrum holdings beyond the screen invites government
    scrutiny, and may or may not be allowed. 
    For example, this is something the FCC had to look into when the merger
    of AT&T and T-Mobile was proposed. 

    challenge for 2013 is that it’s now getting more difficult to define how much spectrum
    is too much.  In the past, we have
    defined spectrum caps and screens in MHz of spectrum. For example, a license
    that covers all signals with a frequency between 900 MHz and 905 MHz is a 5-MHz
    license.  U.S. laws and regulations
    pretend that 5 MHz of spectrum between 900 and 905 MHz is equivalent to 5 MHz
    of spectrum between 2900 and 2905 MHz, so we only have to count the total number
    of MHz.  However, the laws of
    physics tell us otherwise.  In reality,
    the physical properties of spectrum depend on frequency, and it is possible to
    build out a nationwide cellular network at much lower cost if you have spectrum
    around 900 MHz than if you have spectrum around 2900 MHz.  This did not matter when cellular
    began, because all spectrum used for cellular was close to the same
    frequency.  However, the FCC and
    NTIA are working hard to make more spectrum available, and as they do, there can
    be a much greater disparity between the spectrum that is most desirable for
    cellular and the spectrum that is least desirable for cellular.  As this happens, it will make less and
    less sense to treat all spectrum the same in a spectrum cap or spectrum screen.  If we don’t change approach, the
    government’s valiant attempts to make more spectrum available may backfire, as
    this could make it easier for one or two dominant firms to keep 100% of the
    more valuable spectrum away from competitors without exceeding the limit.

    There are
    solutions.  To protect competition
    even as more diverse spectrum bands become available, we could adopt a screen
    that places different weights on each MHz of spectrum depending on the
    frequency.  When it applies
    property taxes, government does not treat a square mile filled with Mississippi
    swampland the same as it treats a square mile filled with Manhattan
    skyscrapers.  There is no reason it
    has to treat 10 MHz of spectrum at 900 MHz the same as 10 MHz of spectrum at 5
    GHz in a spectrum cap or screen. 

    We’ve filed
    comments at the FCC
    on how to fix its outdated spectrum policies. The FCC should act, as an
    important step towards a more competitive future.  The nation deserves a market where cellular providers
    compete based on their ability to provide customers with excellent service at a
    reasonable price, and not on their ability to keep spectrum away from the