Banning bidders from spectrum auctions doesn’t make sense

Policymakers are well aware of the far-reaching benefits of competition. Many aim for “ensuring a competitive landscape for U.S. businesses” to be their calling card, with the good intention of fueling the American economic engine. But before taking action, particularly that which affects sectors like the telecom industry that are already competitive, it’s important to understand where we are and where we’re going.
 
The wireless industry is a standout. According to CTIA’s semi-annual statistics, it grew five times faster than the U.S. economy overall in 2012. Consumer demand for the advanced capabilities and mobility of smartphones, tablets and laptops is exploding, and carriers are challenged by limited airwaves, or “spectrum,” over which wireless data travels. The federal government intends to put airspace up for sale that is currently used by broadcast television stations, but is well-suited for mobile broadband – and it couldn’t come soon enough, because wireless providers are in dire need of the opportunity to buy the spectrum required to serve their customers.
 
Carriers like AT&T and Verizon led the wireless industry’s $17.2 billion in capital investment in the last half of 2012 – up 37 percent from the previous year – yet they’re struggling to provide their customers with enough bandwidth to take full advantage of these investments in innovation. The spectrum crunch is upon us, and all qualified bidders should have the chance to participate in spectrum auctions in order to expand high-speed mobile broadband service to more Americans. Yet on April 11 the Justice Department asked that the FCC to restrict the two largest wireless providers from bidding in the upcoming auction.  In considering the Justice Department’s request, the FCC should first refer back to the statute authorizing the incentive auction, which requires the FCC to allow all qualified bidders to participate and affirms Congress’ intent to afford all potential bidders equal treatment.
 
{mosads}An independent study by Georgetown University’s Center for Business and Public Policy analyzed the economic impact of restricting participation in the upcoming auctions. The study finds that completely barring Verizon and AT&T from participating in the bidding would reduce auction revenues by about 40 percent, lowering federal auction proceeds as much as $12 billion. Rules that deprive the largest carriers of having a shot at buying more spectrum would also slow down the nationwide transition to faster 4G, fourth generation wireless broadband, and would result in estimated, cumulative losses of 118,400 jobs by 2017. Overreaching restrictions that have the effect of reducing auction proceeds would mean that less spectrum is available for mobile broadband use – a double-whammy that would hurt the American consumer and taxpayer.
 
Favoring certain bidders in the past, without enough concern for effectiveness,  negatively impacted auction proceeds, left major blocks of spectrum unused, and led to what former FCC Chairman Julius Genachowski identified as “America’s looming spectrum crisis.”  Going forward, the FCC should instead focus on setting up a fair process that gives all qualified bidders an opportunity to compete in the wireless market.
 
Competition is important. So is alleviating the spectrum crunch by deploying mobile broadband to satisfy increasing consumer demand and funding the Congressional mandate to build-out a public interoperable mobile broadband public safety network. The Justice Department’s proposal isn’t about big companies making space for small ones. T-Mobile and Sprint, the two companies the proposal would benefit, are multi-billion dollar entities with nationwide footprints. They ought to be able to slug it out in the marketplace on their own. 
 
Unlike kid games, in real life nobody is guaranteed a trophy.
 
Simmons is co-chairman of the Internet Innovation Alliance (IIA).