Early Activation of Extra Licensed C-band Spectrum Will Enhance 5G Services and Competition

On August 14, Verizon announced that it has gained access to all of the C-band spectrum that it acquired through the FCC's spectrum license auction in March 2021. And today, August 16, it is reported that AT&T has doubled its available licensed C-band spectrum for 5G deployment. Apparently, the C-band spectrum for both providers was cleared ahead of schedule. Consumers will benefit from the network coverage and performance improvements enabled by the activation of valuable C-band (3.7 GHz) spectrum. And this development should enhance the overall competitiveness of the wireless market.

In an October 2022 blog post, I noted findings by OpenSignal that activation of C-band spectrum was leading to improved speeds for Verizon's and AT&T's respective 5G network services. And now with additional C-band spectrum available for use, Verizon and AT&T will significantly boost the speeds and capacity of their 5G service offerings. According to a Verizon press release:

Verizon won C-Band licenses for between 140-200 MHz in all available markets, and began deploying 60 MHz in the first 46 areas in 2022. As the additional spectrum has been cleared by satellite companies outside of the first 46 areas, Verizon has been able to deploy 5G Ultra Wideband using a portion of its licensed bandwidth in many more markets coast to coast. Now, with final clearance from the satellite incumbents, Verizon will be able to use the entirety of its licensed C-band spectrum, an average of 161 MHz coast to coast with some markets accessing a full 200 MHz. Verizon has been deploying equipment that is capable of the full 200MHz of bandwidth, so with a mere software update, customers will start to see the effects of this dramatic increase in bandwidth in the immediate next few days and weeks.

And as observed a news article in FierceWireless, AT&T combines C-band spectrum with 3.45 GHz spectrum nationwide, and its 5G mid-band network now covers over 175 million people, and its nationwide 5G network, including low-band spectrum, covers approximately 290 million people. 

Verizon's press release states its 5G services currently are available to over 222 million people in 359 markets. It also is reported in FierceWireless that Verizon will be operating its 5G network using C-band spectrum at full power in the vicinity of airports. Free State Foundation President Randolph May and I wrote about the FAA's questionable late-in-the-game attempt to halt full use of licensed C-band spectrum by Verizon and AT&T in a November 2021 Perspectives from FSF Scholars, "The FAA Should Stop Interfering With 5G in the C-Band." The FCC has "unified jurisdiction and regulatory power" over commercial spectrum, not the FAA. And that midnight hour dispute regarding C-band spectrum near airports almost certainly would have been avoided had the FAA been more engaged earlier in the Commission's C-band proceeding, when it had ample opportunity to do so. Interagency disputes over spectrum have been too numerous in recent years, and the effect of those disputes is detrimental to the full use of valuable spectrum and timely deployment of next-generation wireless services. As President May and I also wrote a February 2022 Perspectives from FSF Scholars, "Congress Should Require Better Agency Coordination of Spectrum Policy."

In Early 2023, Fixed Wireless Access Services Are Still Going Strong

On April 24 and 25, T-Mobile and Verizon Wireless released their respective first quarter results for 2023. Once again, both nationwide mobile providers reportedly had strong net subscriber additions to their fixed wireless access (FWA) broadband services.  

T-Mobile reportedly added 523,000 net subscribers to its FWA services. According to a May 17 article in FierceWireless,T-Mobile "has a goal to grow its existing 3.2 million FWA customers to around 7 million to 8 million FWA customers by the end of 2025" and that "it is looking at various options that may allow it to grow beyond that 7 million or 8 million figure."

 

An April 25 article in FierceWireless by Sue Marek states that Verizon "reported 393,000 FWA net adds in the quarter, bringing its total FWA subscriber base to 1.9 million. Of those 393,000 FWA net adds, 137,000 came from the company's Business group." Additionally, an April 25 article in FierceWireless by Diana Goovaerts notes that Verizon "stands to gain 100MHz of additional C-Band spectrum later this year which it plans to deploy in urban areas to benefit FWA and wireless customers who are currently being served with 60MHz of C-Band."

 

With increased access to C-band spectrum, continued expansion of 5G network coverage, and growth of fiber for backhaul support, FWA is likely to be an attractive option for more Americans by the end of the year. And, as observed in a November 1, 2022 blog post, FWA is a particularly attractive option for those residing in areas with geographical terrain that are difficult-to-reach as well as in areas with lower population densities. These benefits of FWA are the subject of my April 2022 Perspectives from FSF Scholars, "Fixed Wireless Access is Boosting Rural Broadband and Consumer Choice." 

 

However, a replenished spectrum pipeline is a necessary condition for realizing the full potential of FWA and for maximizing the competitiveness of the broadband services marketplace. My blog post from March 9 of this year called attention to the lapsing of the FCC's authority to conduct spectrum license auctions. And the Free State Foundation's April 17 public comments to the NTIA urged the timely adoption and implementation of a National Spectrum Strategy that will boost the supply of spectrum for commercial and other private uses, particularly for licensed commercial use. Congress should promptly act to restore the FCC's spectrum auction authority, and the NTIA should act timely in adopting the implementation plan for the long-awaited National Spectrum Strategy.  

Cox Mobile Gives Consumers Another Choice for Wireless Services

On January 5, Cox Communications announced the launch of Cox Mobile. The mobile virtual network operator (MVNO) service is available to its Internet subscribers in Cox's geographic markets. It is reported that Cox Mobile harnesses over 4 million Cox Wi-Fi hot spots in combination with Verizon's 5G cellular network.

As pointed out in blog posts from May, September, and October 2022, consumer adoption of cable wireless MVNO services that are bundled with fixed residential cable broadband Internet access services continues to grow. The launch of Cox Mobile is another indicator of the competitiveness of the wireless marketplace. Consumers living in Cox's footprint will now gain an additional choice for mobile wireless services. 

Notably, these hybrid-model cable wireless MVNOs are not mere resellers. They rely, in substantial part, on their own network facilities. And it is widely expected that these competitive cable wireless MVNOs will put more of their own licensed spectrum into use and thereby reduce their business costs for leasing wholesale access to mobile cellular networks. In 2023, it will be interesting to watch the technological development of these emergent services as well as consumer responses.  

The End of 3G Wireless Era Enables America's 5G Future

On January 3, Verizon announced that its 3G CDMA mobile network has been decommissioned. The retirement of Verizon's 3G network had been scheduled to take place by December 31, 2021. Now all three nationwide mobile wireless broadband providers now have retired their 3G networks.

As explained in my September 2021 Perspectives from FSF Scholars, "AT&T's 3G Sunset Will Make Way for Speedy 5G Services": "Old 3G networks consume significant amounts of spectrum for a small and fast-shrinking user base. That valuable spectrum needs to be repurposed to timely roll out 5G networks… so that consumers can benefit from their promised speeds and capabilities." And in an August 2021 Perspectives from FSF Scholars titled "T-Mobile's Timely 3G Sunset Will Spur Stronger Services," I wrote that "any regulatory intervention to extend the life of 3G networks would keep wireless services stuck in the slow-speed era to the overall detriment of consumers." Blog posts (here, here, and here) by FSF scholars also tracked the progress of 3G network retirement during 2022.

Fortunately, unjustified regulatory obstacles to 3G retirement appear to have been avoided. When it comes to the deployment of 5G services, every bit of available spectrum helps. The spectrum used to support dwindling 3G legacy services is now available for next-gen 5G services.  

Carriers Set Record With New Fixed Wireless Subscribers

On October 21 and 27, Verizon Wireless and T-Mobile each released their third quarter results for 2022. Both nationwide carries posted record numbers of net subscriber additions to their fixed wireless access (FWA) broadband services. Verizon Wireless reported an impressive 342,000 fixed wireless net additions – a quarterly record for Verizon Wireless. And T-Mobile reported that it added a record high 578,000 high speed Internet customers. Although T-Mobile did not provide a specific service breakdown for that category, its record-breaking figure apparently consists primarily of net additions to its FWA services.

FWA services, which are increasingly offered using 5G networks, are particularly important for their ability to connect costly and difficult-to-reach geographic areas of the country. For more on that point, see my April 2022 Perspectives from FSF Scholars, "Fixed Wireless Access is Boosting Rural Broadband and Consumer Choice." And along with cable mobile virtual network operator (MVNO) wireless services, FWA services are a vibrant form of intermodal competition in today's communications market. 

Ookla Report Shows U.S. Progress in 5G Mobile Wireless Speeds

The boost to mobile wireless speeds from 5G networks – and increasing use of C-band spectrum for 5G – are reflected in Ookla's Speedtest Global Index for the United States for the third quarter of 2022. According to Ookla: 

T-Mobile had the fastest median 5G download speed in the U.S. at 193.06 Mbps during Q3 2022, a slight increase over Q2 2022. Verizon Wireless remained second, and saw a slight increase to 119.80 Mbps in Q3 2022. AT&T remained third at 81.22 Mbps — a slight increase from Q2 2022.

For the third quarter of this year, Ookla found that the median download/upload speeds for mobile wireless broadband in the U.S. – encompassing 5G as well as earlier generation networks – was 68.34 Mbps/8.56 Mbps and the mean speeds were 141.54 Mbps/15.48 Mbps. Ookla's report also includes comparative evaluations of latency and video support capabilities by the three competing nationwide mobile wireless providers.

 

Again, speed and other performance figures can be expected to continue to improve by the end of this year and well into 2023 – particularly for 5G – as AT&T and Verizon continue to phase-in their licensed C-band spectrum for 5G services and T-Mobile brings online additional licensed spectrum in the 2.5 GHz band that it has acquired through the FCC's Auction 108. 

Report Finds C-Band Spectrum is Speeding Up 5G Services

OpenSignal released a report on October 12 titled "How C-Band is jump-starting AT&T and Verizon's 5G experience." According to the report, AT&T users' average 5G download speeds increased by 34.6% between March and September, going from 50 Mbps up to 67.3 Mbps. And during that same time span, Verizon users' 5G download speeds increased 15.8%, going from 70.3 Mbps up to 81.4 Mbps. As the OpenSignal report observes, during that seven-month timeframe, both mobile broadband providers boosted their use of licensed C-band spectrum in providing 5G services, with AT&T's use of C-band rising to more than 30% of user 5G readings while Verizon's use of C-band grew to almost 50% of user 5G readings.

The OpenSignal report findings reflect the importance of C-band spectrum for realizing the full potential of 5G wireless networks to enhance broadband market competition and offer value to consumers. As C-band increasingly is put into use, one can expect the performance metrics to show further significant improvements in speeds as well as capacity. 

The report also ought to serve as a reminder of the necessity of making more mid-band spectrum available for commercial use. There are presently three mid-band spectrum candidates for repurposing: the 3.1-3.45 GHz band, the 4.4-4.49 GHz band, and the 7.125-8.46 GHz band. Together, these three swaths comprise over 1,400 MHz of spectrum that potentially could be licensed for commercial wireless use, to the benefit of consumers, industry, and the American economy. Congress should pursue legislation to authorize the FCC to repurpose those bands for competitive bidding spectrum license auctions, and require NTIA and other executive branch agencies to coordinate efforts to address incumbent user needs and technical complexities that will need to be addressed in order to bring those auctions to fruition. 

Cell Tower Case Shows Wireless Siting Rules Remain a Must for 5G Buildout

On September 26, Verizon Wireless voluntarily dismissed a lawsuit against the City of Fresno, California, as the parties reached an agreement on Verizon's construction of a 5G cell tower. The resolution of the case removes a series of roadblocks to construction of next-generation wireless infrastructure, and it stands as a reminder of the importance of infrastructure siting policies such as "shot clocks" that prohibit unreasonable permit process delays. 

Back in July 2021, Verizon filed a permit application to build an 80-foot tower in the back of a parking lot in the downtown area of Fresno, east of a highway, in order to meet wireless traffic capacity demands. The 150-day "shot clock" in which the city was required to make a decision on the permit application, the shot clock expired on February 28, 2022 without the city having reached any such decision. This despite two separate agreements between Verizon and the city of Fresno to toll the 150-day "shot clock" and thereby extend it for the city's benefit. The city made the Verizon's application the subject of four public hearings without having made any final decision when the wireless carrier finally filed its lawsuit in the U.S. District Court for the Eastern District of California on June 30, 2022. 

 

Under Section 332(c)(7)(B)(ii) of the Telecommunications Act of 1996, a local government must "act on any request for authorization to place, construct, or modify personal wireless facilities within a reasonable period of time." In its 2009 Wireless Infrastructure Order (or Shot Clock Ruling), the FCC used its discretionary authority to interpret that statutory provision by establishing a rebuttable presumption that a "reasonable period of time" is 90 days to process a "collocation" application and 150 days to process all other applications – including the construction of new cell towers like the one Verizon is now going to build in Fresno.
 

On its face, it seems quite unlikely that Fresno would have been able to overcome the presumption that its lengthy and ongoing delay in making any decision about whether to approve or deny Verizon's cell tower permit application was justified. The city almost surely would have taken a loss in court, and Verizon would have obtained judicial relief necessary to build the tower. Now that the matter has been resolved, Verizon will build the tower and expand its 5G network coverage and capacity for residents in Fresno.

 

The lawsuit in Fresno MSA Partnership Limited (Verizon) v. City of Fresno and its result bespeak the continued need for wireless infrastructure citing rules that prohibit unreasonable permit processing delays and other unreasonable local regulatory obstacles to building next-generation wireless infrastructure. If there had been no "shot clock," who knows how long the administrative delay in Fresno would have continued? 

 

My Free State Foundation former colleague Andrew Magloughlin and I made this same basic point in a June 2022 Perspectives from FSF Scholars titled "The FCC Should Preserve and Expand Its Broadband Infrastructure Reforms." In that Perspectives, we wrote: "Local regulatory barriers to broadband infrastructure deployment have come in the forms of moratoria on construction permit approval, lengthy administrative processing periods for permit applications, high fees for filing permits that bear no relation to the costs of reviewing applications, and high recurring fees for providing service." Our Perspectives focused on the infrastructure policy reforms adopted by FCC between 2018 and 2021. As we explained in that paper: 

The Commission's important recently-adopted infrastructure policy reforms preempt such barriers to broadband facilities construction and upgrades. By reducing unnecessary local regulatory costs, the Commission's reforms help preserve provider resources for investment in additional broadband infrastructure, including in harder-to-serve areas. And the elimination or reduction of excessive local administrative delays allows consumers timelier access to 5G, fiber, and gigabit-speed cable broadband services. 

The federal government has allocated $42.45 billion in funds through the Broadband, Equity, Access, and Deployment (BEAD) Program as well as billions more through other programs to subsidize buildout of broadband network facilities to unserved Americans. Having infrastructure siting policies like shot clocks in place will help ensure that those billions achieve their purpose in connecting more Americans and closing the digital divide. 

FCC Made a Good Call in Approving Verizon/TracFone Merger

Hours after my November 22 blog post, the FCC released its order approving the Verizon/TracFone merger. The Commission reached a strongly supportable conclusion, which is contained in paragraph 150 of its order:

After carefully reviewing the record in this proceeding and performing a thorough and extensive analysis, we find that the transaction will lower TracFone’s costs to provide service and improve its ability to offer prepaid and Lifeline services. These benefits, combined with Verizon’s robust commitments, which we accept as conditions of our approval, ensure that the proposed transaction will serve the public interest, convenience, and necessity. Accordingly, we approve the transaction. 

Notably, Commissioner Brendan Carr concurred in the result; but his statement accompanying the Verizon/TracFone Order also pointed to the agency's 2008 "mobile telephony/broadband services" market definition that it applied in evaluating the merger. Commissioner Carr cited to his thoughtful statement accompanying the 2019 T-Mobile/Sprint Order on the need for the FCC to update its framework for assessing competition and the likely effects of mergers in today's broadband services market. Insights from that prior statement, part of which are quoted below, are even more relevant as we approach 2022 than they were in 2019:

Instead of formally updating our view of competition to reflect 5G, we conduct our initial screen using the market definition of "mobile telephony/broadband services." The Commission created that market definition in November 2008—more than two years before any of the nationwide wireless providers had deployed 4G LTE. Even at that time, we saw how faster wireless service would combine the markets for talk, text, and low-data uses on phones with the market for high-data uses on computers and non-voice devices. The new market definition recognized how "mobile broadband services" (enabled by upgraded 3G and 4G networks) would break down previously siloed industries. And so when we reviewed a transaction between wireless companies in 2008, we took the opportunity to update our market definition, "conclud[ing] that there are risks associated with defining product markets too narrowly, since doing so may thwart this and future pro-competitive deals that take place in the context of rapidly evolving markets and services."

 

The Commission shows no such prescience in defining the relevant market here. Rather, it applies the same definition that both the FCC and antitrust authorities have been using for a decade. By sticking with a pre-4G market definition, we miss an essential feature of 5G: the blurring of wired and wireless networks and the enhanced competition that results. While our legacy market definition may track FCCs and antitrust authorities past, it prevents the expert agency Congress created to regulate telecommunications from helping our sister agencies modernize their approach to this technology. 

Sunny Forecast for 5G Fixed Wireless Broadband Access in the U.S.

According to a November 10 report by ABI Research, "in 2026, the FWA [Fixed Wireless Access] market will exceed 180 million subscriptions and generate US$70 billion in revenue." It forecasts quick 5G FWA rollouts in North America because it can be deployed faster to subscribers and for less capital expenditures compared to fiber-to-the-home. Thus: "In 2026, North American and Europe combined will represent nearly 60% of global 5G FWA subscriptions." While these figures aren't specific to the United States, one ought to expect this country to be the leader in 5G FWA deployment. And the press release for ABI's report acknowledges that Verizon is an early adopter of 5G FWA using mmWave band spectrum, with U.S. Cellular also planning to deploy in the mmWave band. 

The future of 5G FWA looks bright in the U.S. with T-Mobile and AT&T both making offerings available. And an October 26 blog post by Free State Foundation Legal Fellow Andrew Magloughlin highlighted the Verizon-Amazon deal for rural backhaul that will deliver Verizon's fixed wireless service. In the months ahead, expect FSF scholars to have more to say on 5G FWA and its implications for competition policy. 

Verizon Wireless Rolls Out Call Filter to Stop Robocalls

The growing problem of robocalls is an issue that came up during the Free State Foundation's Eleventh Annual Telecom Policy Conference on March 26. 

Verizon Wireless announced on March 28 that it is making available to subscribers a free version of its Call Filter service, which offers new protections from robocalls. Available as a downloadable mobile app, Call Filter provides alerts for likely spam, reporting of unsolicited numbers, and customizable automatic blocking of robocalls. An enhanced version of the service is available for monthly purchase. 

Importantly, Verizon Wireless also announced it initial implementation of STIR/SHAKEN technology to verify that numbers displayed on Caller ID actually placed calls, combatting so-called "spoof" Caller ID info. 

Conditioning the Incentive Auction Unlikely to Increase Mobile-Broadband Competition in Rural America

On May 1, the Georgetown Center for Business and Public Policy released a new economic policy study by Anna-Maria Kovacs titled, “Regulation in Financial Translation: Will the Incentive Auction Increase Mobile-Broadband Competition in Rural America.” Ms. Kovacs finds that even if the Federal Communications Commission imposes restrictions on large providers, namely AT&T and Verizon, rural communities will mostly likely not benefit from the incentive auction.

Chairman Wheeler has stated that because AT&T and Verizon control a majority of low-band spectrum, which can travel greater distances than high-band spectrum supposedly for less cost, limiting those large providers will induce smaller wireless competitors to bring service to and compete in rural areas. However, even if Sprint, T-Mobile and other smaller competitors are given access to low-band spectrum at below-market prices, the lack or revenue potential in those targeted rural markets will remain a great disincentive. And, neither provider has indicated a willingness or plan to serve rural areas. If limited in the incentive auctions, AT&T and Verizon, who often provide the only service available in rural areas, will lack the capacity to meet rural subscribers’ demands.

The full study is available here and is worth a read.   

Senate Hearing Highlights Healthy Wireless Marketplace

On February 26, the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights held a hearing entitled, “An Examination of Competition in the Wireless Market.” Testifying witnesses included Eric Graham, Senior Vice President, Strategic Relations at Cellular South, Inc., Roslyn Layton, Ph.D. Fellow at Aalborg University in Denmark, Randal Milch, Executive Vice President and General Counsel at Verizon, Jonathan Spalter, Chairman, Mobile Future, Kathleen O’Brien Ham, Vice President, Federal Regulatory Affairs at T-Mobile, and Matthew Wood, Policy Director at Free Press. The witnesses represented diverse perspectives on the wireless ecosystem.

Most witnesses and Senator Mike Lee observed that the wireless marketplace is “fiercely competitive,” and that competition is driven by massive investment and innovation. Verizon’s Randal Milch cited impressive figures reflecting the healthy state of the wireless ecosystem. For instance, the wireless industry invested more than $34 billion in 2013, and has invested over $300 billion since 2001, not including investments in spectrum. Further, the wireless sector has produced 1.6 million new jobs from 2007 – 2011 while many other sectors were experiencing some of the lowest employment rates in years. Overall, the wireless economy is responsible for $2 billion in economic activity and will generate over $1 trillion in economic growth over the next five years.

In addition to impressive investment and growth, the use of creative marketing strategies, business practices, and aggressive infrastructure improvement by wireless providers evidence a healthy, competitive marketplace. More than 90% of U.S. consumers have a choice of three or more providers. And these providers are making aggressive moves to keep and gain customers. From January to September 2013, the telecommunications sector spent $7 billion in advertizing while other segments vastly decreased their marketing spending. T-Mobile alone 4.4 million new subscribers in 2013 (1.6 million added in the fourth quarter of 2013 alone) and built out its virtually non-existent 4G LTE network to cover 20 million people currently. Such practices are clear indicators of tough rivalry and healthy competition in the marketplace.

Not surprisingly, witnesses from Free Press and Cellular South in particular warned that these figures have been the result of regulatory intervention by the FCC and DOJ and not the free market. They also claimed that the market has been characterized by an “acute lack of sustainable competition in the wireless industry” since 2009, citing the fact that AT&T and Verizon between them have more than a 60% share of wireless consumers. But this figure does not accurately represent the true state of competition in the wireless sector.

Today, the market is defined by disruptive technologies and the state of competition is not necessarily reflected by the number of competitors in a given traditional service sector. For instance, Roslyn Layton reported that mobile services may provide their customers with a package of voice, data, and SMS services, but consumers are increasingly using their data subscriptions to access competing communications services like Skype and Facebook and WhatsApp (OTT services). Today Microsoft and Facebook have the largest market caps of any mobile service provider, at $310 and $175 billion respectively. Ms. Layton concludes this shows that while AT&T and Verizon may have grown, this change motivated innovators to create new platforms and technologies that disrupt the competitive landscape and deliver services to consumers in new ways. And the market is to thank for this, not the FCC or the DOJ.

So despite the testimony of the naysayers, the facts and statistics showing the fierce rivalry, steady investment and innovation in the wireless sector presented delivered a clear message: the best way to promote the continued investment, innovation and growth in wireless is to allow the free market to drive the existing virtuous cycle. As Mobile Future Chairman Jonathan Spalter stated, “It would be pure folly” for the government to try to proscribe a regulatory framework based on non-existing market failures. Instead, an approach characterized by regulatory restraint and humility has fostered, and will continue to promote the competitive wireless ecosystem that exists today. As Senator Lee stated, “we must keep our focus on protecting competition, not protecting competitors.”

Wheeler FCC Off to a Good Start in Handling Transaction Reviews

Yesterday, the FCC's International Bureau approved Verizon's buyout of Vodafone's stake in Verizon Wireless. It did this applying the FCC's new foreign ownership rules that are intended to reduce processing delays and, at the same time, stimulate foreign investment in the U.S.

The Commission, under new Chairman Tom Wheeler's leadership, deserves credit for acting quickly on Verizon's petition seeking approval of the buyout. To be candid, there was no legitimate reason for the Commission not to act quickly. But many times in the past, even absent legitimate reasons for delay, there still have been undue delays – many beyond "undue" – in acting on transaction reviews.

If the FCC's relatively quick action is an indication that Chairman Wheeler intends to speed up transaction reviews, then I certainly applaud him for it because, as I have long argued, the pace of marketplace change often outruns the pace of FCC decisionmaking.

For almost fifteen years, in a pretty steady drumbeat, I have been critical of the FCC's abuse of its transaction review process, especially the way the agency often uses the review process to extract conditions from the applicants unrelated to the impacts, competitive or otherwise, created by the transaction. You can read the first Legal Times piece, "Any Volunteers?" here. In the instance, in addition to acting without undue delay, the Commission did not use the transaction review process as an opportunity to apply any such unwarranted conditions.

So, while the Verizon-Vodafone transaction is by no means a good test of how the agency will handle other, more controversial transactions, nevertheless I am happy to credit Tom Wheeler and his team for getting off on the right foot in the handling of this particular transaction.

Two Sides of the Internet’s Two-Sidedness: A Consumer Welfare Perspective

The FCC’s Open Internet rules have kept lawyers, government officials, industry groups, and scholars buzzing since December 2010. But last month, the oral arguments in Verizon’s case challenging the FCC's rules really fanned the flame. In that hearing, one argument was that broadband Internet providers are part of a so-called two-sided market, and that the Open Internet rules have a negative effect given this fact, particularly from a consumer perspective. Earlier this week, Justin (Gus) Hurwitz, a member of the Free State Foundation's Board of Academic Advisors and University of Nebraska law professor, focused on this issue in his piece “Two Sides of the Internet’s Two-Sidedness: A Consumer Welfare Perspective.”

Mr. Hurwitz explored whether broadband Internet providers are part of a two-sided market (or could be, absent the FCC rules), and how this factor will affect the development of the broadband Internet market – and ultimately how it affects consumers. He argues that whether ISPs are part of a two-sided market or not, “today’s broadband Internet market is precisely the sort of market in which the FCC’s ‘prophylactic’ approach is inappropriate.” Instead, the broadband Internet market is one in which “we should seek out opportunities to experiment with multisided price structure – and even reward firms for taking the risk of experimenting – in order to maximize the value of the Internet to consumers.” Overall, Mr. Hurwitz finds that the Commission’s Open Internet rules hinder the development of the Internet marketplace and result in harm to consumers.

If you had not had the opportunity to read the full piece, it is well worth exploring this clear and useful explanation of one fascinating element of the Open Internet debate.

A Good Spectrum Deal for Consumers

It's worth taking special note of the spectrum swap deal announced on Monday by T-Mobile and Verizon Wireless because it is a positive development. Here is an AP story on the deal that explains what each provider is getting and giving up. 

When the deal was announced, here is a statement I gave to the press:

"Foremost, the spectrum swap announcement by Verizon and T-Mobile is good for consumers because it should result in getting additional spectrum in use for 4G broadband services sooner rather than later. It paves the way for T-Mobile to become a stronger competitor, which is a positive for consumers. And it ought to mean the Commission acts with dispatch to approve the Verizon-SpectrumCo transaction." 

If the FCC approves the transaction, T-Mobile will be able to be a stronger competitor in the wireless broadband marketplace and this is good for consumers. 

And it is also good for consumers when marketplace participants are allowed to negotiate spectrum swaps in the secondary market without having the FCC dictate its own preferred market outcomes. 

With no one seriously disputing the looming spectrum crunch, for the sake of meeting the rapidly growing consumer demand for wireless broadband services, the FCC needs to make it a priority to approve promptly both the Verizon Wireless-SpectrumCo and T-Mobile-Verizon Wireless spectrum transactions.