Thursday, June 27, 2013

"Don't Equivocate - Clear and Reallocate"

When President Obama issued his June 14 Memorandum to the heads of the federal government agencies, I said at the time that another presidential memorandum was "fine" as far as it went. But I also said that it will take "some real ongoing presidential leadership that thus far has been missing" to get the federal agencies to take further concrete steps to get more of the spectrum they hold into the hands of private sector wireless providers.

Don't forget that almost 60% of the spectrum that could be used by private providers for wireless broadband service presently is held by the federal government.
There is no doubt, of course, that the nation's wireless providers are facing what former FCC Chairman Julius Genachowski, early in his tenure, called a "spectrum crunch." Indeed, in his June 14 Presidential Memorandum, President Obama acknowledges that back in June 2010, he "directed the Secretary of Commerce, working through the National Telecommunications and Information Administration (NTIA), to collaborate with the Federal Communications Commission (FCC) to make 500 MHz of Federal and nonfederal spectrum available for wireless broadband use within 10 years."
Another acknowledgement of the 2010 pledge concerning the additional 500 MHz is welcome. But the sad reality is that the Obama Administration has not made as much progress as it should have in fulfilling the pledge.
In the new June 14 Memorandum, the President declares, "we must make available even more spectrum and create new avenues for wireless innovation." Unfortunately, it then goes on to suggest that the remedy for addressing the spectrum crunch lies mostly with increased spectrum sharing between the federal agencies holding the spectrum and the commercial providers that desperately need some of it. The Administration's increasingly single-minded focus on spectrum sharing is a wrong-headed approach.
The right approach can be capsulized this way: "Don't Equivocate. Clear and Reallocate!"
In fact, it might be useful for the Administration to print banners with this injunction to place around the federal agencies under every framed photo of the president, at least in the federal agencies holding spectrum.
The imperative to "clear and reallocate" spectrum is most urgent with respect to the 1755 - 1780 MHz band so that it can be paired with the 2155 - 2180 MHz ("AWS-3) band. This spectrum is ideal for wireless broadband traffic and if the two bands are auctioned together, it has been estimated the auction might raise as much as $15 billion for the U.S. Treasury.
While there may be a role for spectrum sharing in alleviating the spectrum crunch, sharing presents certain problems that make it less than ideal as a sensible policy prescription, at least on the wholesale basis the Administration seems to envision. In his FSF Perspectives entitled, "Sharing Licensed Spectrum with Government Lessens Prospects for Wireless Broadband," my colleague Seth Cooper explained in some detail why clearing and reallocation should be preferred. As he concluded:
"Putting repurposed spectrum to its highest commercial use calls for heavy investment by carriers in next-generation wireless broadband networks. The certainty and incentives required for such multi-billion dollar investments are best supplied by spectrum licenses for exclusive use. Arrangements for the private sector and government agencies to share spectrum might be a useful transition tool. But proposals for such sharing now appear prevalent enough that, if adopted, they would undermine the goal of the current undertaking to repurpose spectrum."
With all this in mind, today's hearing on spectrum and wireless matters before the House Energy and Commerce Committee is of considerable importance. Aside from further legislating with regard to spectrum policy, Congress has an important oversight role, of course. In fulfilling that role, the Committee members should use the hearing to focus attention on the need for the Obama Administration to act with a sense of urgency in getting underutilized federal spectrum into the hands of the private sector.
As CTIA's Executive Vice President Chris Guttman-McCabe puts it in his pre-filed Commerce Committee hearing testimony:
"Clearing Federal users from some of the bands they currently occupy will help the commercial sector gain access to the spectrum necessary to stay ahead of consumer demand. And perhaps just as importantly, a relocation process that leads to an auction can provide a critical infusion of funds to facilitate Federal users’ movement to state-of-the-art technology. This will reduce ongoing maintenance and procurement costs for Federal agencies and free up resources that are increasingly strained by the budget caps imposed under the Budget Control Act."
Hopefully, an unequivocal message will emerge from today's House hearing: "Don't Equivocate. Clear and Reallocate!"
PS – For anyone who doesn't already understand why there is an impending spectrum crunch, consider the following indicators, all taken from the FCC's Sixteenth Wireless Competition Report:
·          Consumer choice among wireless service providers prevails. As of October 2012, 99.3% of the population is served by 2 or more mobile voice providers, 97.2% by 3 or more, 92.8% by 4 or more, and 80.4% by 5 or more. Additionally, 97.8% of the population is served by 2 or more mobile broadband providers, 91.6% by 3 or more, 82% by 4 or more, and 68.9% by 5 or more.
·          Wireless subscriptions continue to climb. "[A]t the end of 2011 there were 298.3 million subscribers to mobile telephone, or voice, service, up nearly 4.6 percent from 285.1 million" from a year before. Also, "there were 142.1 million subscribers to mobile Internet access services at speeds exceeding 200 kbps in at least one direction…more than double the 56.3 million reported for year-end 2009."
·          Smartphone consumers now a growing majority. "[A]mong those who acquired a new cell phone in the second quarter of 2012, 67 percent opted for a smartphone, up from 30 percent in the fourth quarter of 2009. As of the second quarter of 2012, 55 percent of U.S. mobile subscribers now own smartphones."
·          Consumer prices have seen decreases. Voice revenue per minute "has declined over the past 18 years, from more than $0.40 to the current $0.05," according to one estimate. Moreover, "the effective price per megabyte of data declined from $0.47 per megabyte in the third quarter of 2008 to about $0.05 per megabyte in the fourth quarter of 2010, which is roughly an 89 percent decrease."
·          Private investment is sizeable and has increased.2010 capital investment by wireless providers totaled between $23 and $25 billion, marking double-digit increases in investment from the year before.
·          Wireless apps continue to surge. U.S. consumers had access to over 1 million wireless apps by mid-2012. In addition, the "[t]otal number of applications downloaded from Apple’s App Store grew from 100,000 in 2008 to 25 billion in March 2012. By October 2012, Google Play for the Android operating system offered over 675,000 applications and had more than 25 billion total downloads.