Will wireless carriers walk away with most of the spectrum being vacated by broadcasters in a winner-take-all auction that could give up to $10 billion to $15 billion to the U.S. Treasury?
House Democrats injected themselves into that public-policy debate Thursday, providing a hearing for radically alternative proposals backed by a number of Silicon Valley heavyweights. Under a congressional mandate, the Federal Communications Commission (FCC) must sell the spectrum by the end of the year.
“The threshold question is whether the auction structure will produce greater competition in the broadband marketplace,” U.S. Rep. John Dingell (D-Mich.), chairman of the House Energy and Commerce Committee, said. Cable and telephone companies now control 95 percent of the U.S. broadband market.
Because the spectrum is ideal for delivering wireless broadband, the airwaves for sale have alternately been described as beachfront property, prime real estate and the deal of the century. The available airwaves in the 700MHz band include a 60MHz block for commercial broadband wireless use and 24MHz for public-safety agencies.
As originally envisioned by Congress, the commercial spectrum will go the highest bidder. The FCC is expected next week to issue its preliminary rules and guidelines for the spectrum auction.
“This auction presents an opportunity for a new entrant to emerge as national broadband competitor,” Dingell said. “The FCC should adopt rules that maximize the opportunity for new entrants to obtain sufficient spectrum.”
Even outside ths spectrum in the 760 MHz band, there are new idea about how to use the airspace. One is Menlo Park, Calif.-based M2Z Networks, which is backed by venture capitalists Kleiner, Perkins; Charles River Ventures; and Redpoint Ventures, three longtime Silicon Valley players. John Muletta, the former head of the FCC Wireless Bureau, and Milo Medin, the founder of @Home Networks, lead the firm.
M2Z proposes that the FCC give the company a 15-year lease in 2155-2175 MHz band, which is an unpaired segment of spectrum adjacent to the advanced wireless Services Band that was auctioned off last summer. In return, M2Z promises to build a nationwide wireless network offering free high-speed service to virtually all Americans. M2Z would pay the government a 5 percent royalty for premium services available on the network, such as faster-speed tiers.
“Today, perhaps the greatest impediment to our nation’s digital future is the sad fact that the U.S. broadband market is a duopoly that limits customer choice and discourages price competition,” Muletta told lawmakers.
Under the M2Z proposal, its free basic tier of wireless broadband service would provide speeds six times faster than dial-up and offer filtering at the network level to make it family friendly and accessible to children. Muletta said the company is willing to commit to a build-out commitment that would cover 95 percent of the U.S. population within 10 years.
In addition, Muletta said M2Z would provide access to public agencies in national emergencies.
And then there is Greensboro, N.C.-based Frontline Wireless, which wants the FCC to set aside specific spectrum for auction that would require the winning bidder to build a nationwide, interoperable, wireless broadband network for the public-service community at no cost to taxpayers or first responders.
In return, the winning bidder would receive 10MHz of the commercial spectrum available to offer wholesale spectrum with roaming and open access.
The wholesale pipe would be available to all wireless providers, allowing them to sidestep negotiating deals with their retail competitors. Roaming would allow local and regional carriers to offer networks that could compete with the broadband networks of the major carriers.
“Without robust competition, American wireless services will lag behind other nations in terms of innovation, capabilities and cost,” Janice Obuchowski, the former administrator of the National Telecommunications and Information Administration, testified. “Indeed, while we pioneered wireless technology, America has fallen behind much the world in the deployment of new wireless services and technology.”
Frontline was founded by Obuchowski, Haynes Griffin, the founder of Vanguard Cellular, and Reed Hundt, the former FCC chairman. Financial backers include Jim Barksdale, the former Netscape CEO; venture capitalists John Doerr and Ram Shriram; and software radio technology innovator Vanu Bose.
“Proposals such as Frontline appear to provide a technology-efficient way to achieve worthwhile policy objectives while preserving an open auction format,” Dingell said.
Rep. Fred Upton (R-Mich.), though, questioned the “11th hour call” to divvy up the spectrum in a way that could lower the overall value of the spectrum auction. “I am highly skeptical of proposals to rig the auction for particular parties,” Upton said. “The proposals are very complex, and the odds that the government finds the right balance in advance on such a tight timeframe is not necessarily good.”
CTIA, the trade association of incumbent wireless carriers, also opposes the alternative plans of M2Z Networks and Frontline Wireless. “[The FCC] should recognize that M2Z is a profit-driven entity that the commission should not subsidize with free spectrum,” CTIA stated in an FCC petition opposing the idea.
“Like the broadband licensees that CTIA represents, M2Z should not have the right to sidestep the competitive bidding process in order to compete in the broadband marketplace.”
