Policy Documents

Research & Commentary: Undermining a Successful Spectrum Auction System

May 10, 2013

The increasing number of wireless devices, including cell phones, tablets, and laptops, has made wireless airspace a hot commodity. This airspace, known as spectrum, is a limited resource. Only certain portions of the spectrum are usable and available for communications purposes, so telecom companies fight for and pay high prices to lay claim to these frequencies.

The growing shortage of spectrum capacity has been amplified by the slow issuance of new spectrum by the Federal Communications Commission (FCC) through competitive auctions and FCC and Congressional interference in voluntary transfers of broadcast spectrum. With less spectrum being made available in the United States, companies cannot take advantage of newer wireless technology and consumers miss out on a wide array of new products.

The next spectrum auction, expected to take place in 2014, will distribute portions of low-frequency spectrum that are highly valued by telecom companies. Currently, a large section of the spectrum that is suitable for auction between 400 MHz and 3 GHz is held by the government, and the FCC has been slow to issue the largely underutilized spectrum.

Despite the success of the competitive auction system, the Justice Department recently released a filing that strongly suggested the FCC create new auction rules to ensure all companies receive their “fair share” of wireless spectrum in the upcoming auction. Both Verizon and AT&T have voiced their concerns that the FCC’s new auction rules could include caps on how much spectrum one provider could purchase, limiting their participation in the auction. Recent changes to the spectrum auction have trended toward increasing government control over the process.

Broadband development across the United States has been robust, creating wide Internet availability at affordable prices. Greater government control of spectrum would undermine what has been a very successful system. The government already has badly botched the release of unused spectrum, slowly releasing usable spectrum while hoarding some of the best for itself.

The following articles examine wireless spectrum auctions and the growing spectrum crunch from multiple perspectives.


Spectrum Policy: Just Do It!
http://heartland.org/policy-documents/spectrum-policy-just-do-it
In this Reason Foundation Policy Brief, Steve Titch exhorts the Federal Communications Commission to get on with the business of allocating the necessary spectrum to meet the burgeoning demand for wireless services. 

DOJ Joins FCC in Picking Wireless Winners and Losers
http://dailycaller.com/2013/04/15/doj-joins-fcc-in-picking-wireless-winners-and-losers/#ixzz2Qf3oCPEF
Writing in the Daily Caller, Scott Cleland argues the recent public filings by the DOJ and FCC spotlight their reticence toward market-driven spectrum auctions. They also show a strong predilection for preemptive and interventionist wireless regulation, he writes. 

Towards Effective U.S. Broadband Policies
http://heartland.org/policy-documents/towards-effective-us-broadband-policies
If policymakers want to encourage further broadband penetration, they should remove current barriers to entry and impediments to investment, advises Scott Wallsten of the Technology Policy Institute. “But implementing policies such as forced network sharing or unbundling would be harmful, and in practice will reduce incentives to enter the market and invest in infrastructure as a result of the reduced return on investment,” he notes.

FCC Should Conduct Open Spectrum Auctions as Congress Intended, Leave Competition Concerns to Antitrust
http://www.internetfreedomcoalition.com/?p=3003
Writing for Tech Freedom, the authors contend an open auction is essential for the future of the U.S. wireless industry. They argue the auction should be limited only if it can actually be demonstrated that spectrum concentration leads to anticompetitive behavior. True antitrust principles, not ex ante spectrum caps, provide the best remedy for such activities, they write. 

The Wireless Craze, the Unlimited Bandwidth Myth, the Spectrum Auction Faux Pas, and the Punchline to Ronald Coase’s “Big Joke”: An Essay on Airwave Allocation Policy
http://heartland.org/policy-documents/wireless-craze-unlimited-bandwidth-myth-spectrum-auction-faux-pas-and-punchline-ron
Thomas Hazlett examines the marketplace trends driving regulators’ change of approach and considers the path of spectrum policy liberalization in light of emerging technologies, theories of unlimited bandwidth, reforms such as FCC license auctions, and recent progress in deregulating wireless markets in the United States and around the globe.

Analysis: Government Slows the Wireless Juggernaut
http://news.heartland.org/newspaper-article/analysis-government-slows-wireless-juggernaut
Bret Swanson writes in this Heartlander digital magazine article about the government’s interference in Verizon’s acquisition of wireless spectrum from a consortium of cable TV companies. 

Using Spectrum Auctions to Enhance Competition in Wireless Services
http://heartland.org/policy-documents/using-spectrum-auctions-enhance-competition-wireless-services
Effective auction design recognizes the importance of competition, not only in the auction but also in the downstream market for wireless communications. This paper examines several instruments regulators can use in spectrum auctions to enhance competition and thereby improve market outcomes. 

Freeing Spectrum Frees Consumers
http://www.protectingtaxpayers.org/index.php?blog&action=view&post_id=191
In a letter to FCC Chairman Julius Genachowski, the Taxpayers Protection Alliance argues allowing wireless companies to bid on spectrum leads to better services for consumers. “The move will increase competition in the mobile market, give consumers more choices in wireless providers, and expand access to affordable mobile services,” the alliance states. 

Let’s Make a Deal: Broadcasters, Mobile Broadband, and a Market in Spectrum
http://heartland.org/policy-documents/lets-make-deal-broadcasters-mobile-broadband-and-market-spectrum
In a panel discussion moderated by Adam Thierer, then-president of the Progress & Freedom Foundation, the speakers consider the future of spectrum policy in the United States and its effect on broadcast spectrum holders and mobile broadband providers who want more spectrum. 

DC Must Adopt Sense of Urgency for Impending Spectrum Crunch
http://news.heartland.org/newspaper-article/2011/12/23/dc-must-adopt-sense-urgency-impending-spectrum-crunch
Writing in the Heartlander digital magazine, John Stephenson, director of the Communications and Technology Task Force at the American Legislative Exchange Council, assesses the federal government’s failure to address the wireless spectrum crunch and identifies its political and economic effects. 

FCC’s Broadband Plan Brings Spectrum Shortage to Light
http://news.heartland.org/newspaper-article/2010/04/10/fccs-broadband-plan-brings-spectrum-shortage-light
The Heartlander digital magazine reports on the Federal Communications Commission’s National Broadband Plan and the arguments over opening up more spectrum for wireless broadband. The FCC’s plan assumes the spectrum is being wasted by the traditional broadcast television industry, and there is much disagreement over how to use and distribute the available spectrum. 

Congress Mandates FCC Spectrum Auctions
http://news.heartland.org/newspaper-article/2012/02/24/congress-mandates-fcc-spectrum-auctions
The Heartlander digital magazine reports on a mandate, in the bill passed by Congress on February 17, 2012 to extend payroll-tax cuts and unemployment benefits, that the Federal Communications Commission conduct auctions of wireless spectrum for commercial use.

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit The Heartlander’s Tech News Web site at http://news.heartland.org/tech, The Heartland Institute’s Web site at www.heartland.org, and PolicyBot, Heartland’s free online research database, at www.policybot.org

If you have any questions about this issue or The Heartland Institute, contact Heartland Institute Senior Policy Analyst Matthew Glans at 312/377-4000 or mglans@heartland.org.