Friday, November 13, 2015

Remove Barriers, Reallocate Spectrum, and Benefit Consumers and the Economy

In his testimony during the October 28 hearing on “Breaking Down Barriers to Broadband Infrastructure Deployment,” before the House of Representatives’ Energy and Commerce Committee, Scott Bergmann, VP of Regulatory Affairs at CTIA – The Wireless Association, stated that “sound infrastructure policy is a necessary complement to good spectrum policy.” Since 1996, U.S. Internet Service Providers (ISPs) have invested $1.4 trillion in broadband infrastructure. With each passing year, ISPs will likely invest more and more, but there are barriers that constrain private investment. Of course, costly Internet regulations create investment barriers. But other rules at the federal, state, and local levels regarding approval and construction stifle broadband investment as well.
There are six pieces of draft legislation proposed in the House which would lower deployment costs and streamline some of the approval processes, including a “dig once” policy. But as Mr. Bergmann said at the hearing, infrastructure policy and spectrum policy are complements. Therefore, Congress must get it right on both ends for consumers to experience next-generation mobile broadband for years to come.
In 2012, the Congressional Budget Office (CBO) released a report regarding legislation that authorized the FCC to auction spectrum. The CBO estimated that the AWS-3 auction would either not happen or would not bring in any revenue. This turns out to be massively underestimated considering that the AWS-3 auction generated roughly $41 billion and the TV broadcasting auction scheduled for March 2016 is likely to generate another $30 to $40 billion. Currently, a new bill exists, the Federal Incentive Spectrum Act (FISA), which would allow federal agencies that relinquish spectrum to keep 1 percent of the proceeds from the sale. Hopefully, the CBO’s inaccurate 2012 report does not have a lasting effect on members of Congress as FISA moves forward, because reallocating spectrum is absolutely crucial for the economy.
Both spectrum policy and broadband infrastructure policy should be bipartisan issues. The current amount of spectrum allocated for private use will not be enough to keep up with mobile data traffic, which is projected to increase seven-fold from 2015-2019. Additionally, wireless broadband needs wireline infrastructure and many cell towers to deliver quality service. Therefore, Congress should focus on two policies in this space: 1) removing costly barriers so providers can install next-generation technologies throughout the country and 2) reallocating licensed spectrum for private use. Given the positive effect that mobile broadband has had on the economy as a whole and the benefits it brings to American consumers, both of these policies should receive bipartisan support from Congress.
As for the valuation of spectrum auctions, the CBO report was inaccurate. Not only did the CBO claim that the AWS-3 auction would not bring in any revenue, it also failed to realize that allocating more spectrum for commercial use would increase economic activity and create jobs. In a May 2015 Brattle Group and CTIA report entitled “Mobile Broadband Spectrum: A Vital Resource for the American Economy,” authors Coleman Bazelon and Giulia McHenry estimated that licensed spectrum has created $400 billion in economic activity, not including the value of mobile applications. Mr. Bazelon and Ms. McHenry also estimated that for every person employed in the wireless industry an additional 6.5 people will be employed in other sectors. (See my May 2015 blog for more on this.)
When economic activity and jobs are created, the tax base expands, thus creating more opportunities for the government to generate revenue. Therefore, in the long run, reallocating spectrum for private use is a win-win – a win for the economy and a win for taxpayers, because (all else equal) expanding the tax base marginally reduces the tax burden on each individual.
Mobile broadband is transforming day-to-day life in areas like medicine, education, and even policy decisions. For example, telemedicine allows patients to be monitored remotely and can send signals to doctors about possible health threats. Patients who require monitoring will need a mobile connection so doctors can monitor their status at any given time. The rapid growth of mobile data traffic increases the potential for network congestion. Patients who use telemedicine cannot afford to experience congestion or latency. Reallocating spectrum for private use and removing deployment barriers would increase the capacity of mobile networks, mitigate congestion, and potentially save lives.
Mobile technology has already changed the way teachers and students communicate, but with more spectrum and deployment, students will be able to utilize their time more efficiently. The 2010 National Broadband Plan set the goal of connecting all schools with high-speed Internet access, but the FCC has failed to accomplish the spectrum goals, a prerequisite for schools having access to 21st century technology. According to the National Broadband Plan, the FCC should have reallocated 300 MHz of spectrum by 2015, but currently has only reallocated 149 MHz.
Additionally, it can take many years to get permission to build broadband infrastructure on federal property, which is often the only or best way to reach many rural schools. As state and local governments are attempting to fully equip schools with 21st century technology, education curriculum is moving online and digital literacy is becoming a necessary skill. More spectrum and broadband deployment would allow professors to provide students with course work while traveling, teachers to enhance the learning experience of school field trips, and students to research in off-campus settings.
Importantly to members of Congress, constituents are using mobile broadband to engage themselves and others in the political process. Social media platforms, like Facebook and Twitter, are allowing people of all ages and demographics to have a greater voice in shaping policy.
The expansion of mobile broadband has positively impacted the economy, medicine, education, policymaking, and many other realms of American life. It is certainly time for Congress to act to remove barriers to further infrastructure deployment that, if not addressed, are likely to negatively impact the consumer experience in future years.