Bidding At FCC TV Spectrum Auction May Be Restricted For Large Carriers

An anonymous reader writes "Rumors have surfaced that the Federal Communications Commission (FCC) will restrict bidding at their TV spectrum auction in 2015 to effectively favor smaller carriers. Specifically, when 'auction bidding hits an as-of-yet unknown threshold in a given market, the FCC would set aside up to 30MHz of spectrum in that market. Companies that hold at least one-third of the low-band spectrum in that market then wouldn't be allowed to bid on the 30MHz of spectrum that has been set aside.' Therefore, 'in all band plans less than 70MHz, restricted bidders—specifically AT&T and Verizon (and in a small number of markets, potentially US Cellular or CSpire)—would be limited to bidding for only three blocks.' The rumors may be true since AT&T on Wednesday threatened to not participate in the auction at all as a protest against what it sees as unfair treatment."

Comments

Re:Government picking favorites

[lgw]

Well, to begin with, if the big players want that bandwidth they'll just buy whoever buys it. Problem solved. If some of the bidders are shell companies created for just such a contingency, so much the better.

at&t wasn't welcome anyway

[sir-gold]

"AT&T on Wednesday threatened to not participate in the auction at all"

Good, that leaves more spectrum for the companies that actually need it, instead of wannabe monopolists that have spectrum to spare.

Re:at&t wasn't welcome anyway

[non0score]

No, there's no "fascinating question that makes this debate interesting". The government should prevent any market condition where a hostile monopoly may manifest. Full stop.

AT&T and Verizon has proven that they can and will abuse their oligopoly position and not compete. This will not change in any foreseeable circumstance short of being forced into a competitive landscape. The duty of government then is to lower the barrier to entry, which, in this case, the barrier is the amazing amount of cash AT&T and Verizon has to outbid everyone else.

And if you object to taxpayers subsidizing, then I can simply point you at the cost of running any government agency that (ostensibly?) promotes fair competition: e.g. SEC. The cost to hire lawyers, set up offices, conduct audits, litigate -- none of that is free. Do I see you label "preventing and punishing insider trading" as an "interesting debate since it has no objectively correct answer" in a cost analysis? No, of course not, because it's desirable and everything has an associated cost to begin with.

Re:at&t wasn't welcome anyway

[squiggleslash]

You're assuming that the taxpayer getting as much money directly from a sale as possible is in some way legitimate government policy.

The government is not a business and the "taxpayer" has more interests than simply short term reduction of their taxes. In particular a lower cost of living, something we'll get if there's better competition and if we don't force businesses in general to have absurd unnecessary costs, is likely to benefit us more.

Short term "maximizing direct revenues from auctions" thinking is what got us into the stupid situation where spectrum auctions are geographic, resulting in decades of overpriced, poor quality, cellular service. It's also part of a mentality that's undermining every attempt to have the private sector provide quality infrastructure in the first place, usually at great social and economic cost to the rest of us. The same idiocy, practiced through property taxes, is in part why the entire railroad system in the US collapsed in the 1960s and 1970s.

We need to get away from that kind of thinking, and start looking at cost of living issues rather than what tax rate we can get away with.

Re:at&t wasn't welcome anyway

[Rich0]

It's an interesting quandary for the FCC. AT&T and Verizon can and will pay more for the spectrum to be auctioned. That means US taxpayers get more money, which is what is supposed to happen when the government is selling public airwaves.

Only if you look at the sales of the spectrum. Subtract all the monthly cell phone plan payments those taxpayers are making and AT&T/Verizon don't look like such a great deal any longer.

Too big to fail is a recipe for disaster. When a market gets dominated by one or two players, they should be handicapped until their customers have incentive to flee elsewhere and the market share drops to a moderate level. This should be done whether they're doing anything wrong or not - it is just good for the economy. Nothing personal - just business.

Re:at&t wasn't welcome anyway

[jeffb (2.718)]

Another "fascinating question". I'd suggest asking some Native Americans, or some descendants of slaves.

Re:Government picking favorites

[sir-gold]

They aren't picking favorites, they are setting limits on greed.

There is nothing wrong with kicking fatty out the door when he goes back for his 10th plate at the buffet line, especially when you find out he was saving some of it for "later"
(In reference to Verizon's purchase of the 700mhz block A spectrum that they never got around to using)

Sale or lease?

[Duhavid]

What I want to know is why is this spectrum for sale?
Why isnt it for lease? Why arent the carriers paying something per year for the use of the spectrum?

Re:Sale or lease?

[mlyle]

The argument against shorter-term leases is that you have to invest a lot in infrastructure to make use of the spectrum.

Most of these licenses that are being bid for in the auction are for ten year terms, I believe.

Re:Sale or lease?

[schnell]

Why isnt it for lease? Why arent the carriers paying something per year for the use of the spectrum?

Technically, it is a more like a very long term lease rather than a perpetual sale. Ultimately, those frequencies are still under the discretion of the FCC to allocate or revoke subject to certain conditions.

To answer your question about why carriers don't "rent" it annually, it's because there is an ecosystem around those frequencies that require huge multi-year investments. Let's say that you're carrier X and you just bought the rights to the LTE "C Block" frequencies. You need to buy hundreds of millions of dollars worth of LTE equipment that runs is the C Block, site your towers to match the RF propagation characteristics of that particular frequency band, have all your smartphone vendors that you commit to buy XXX millions of units from have their devices support that spectrum block, etc. etc. Every radio band that you add to a piece of tower equipment costs money, and adding additional bands to phones takes up motherboard space and adds extra costs, so on both sides there is a monetary cost to supporting additional spectrum bands.

If you could lose that spectrum next year to another bidder - you have literally spent hundreds of millions of $$$ on equipment and devices that are worthless to you - or, worse - are only worthwhile to customers who will use the network of your competitor who just bought that spectrum. If carriers could not lock up spectrum blocks long term, the uncertainty would mean that they would pay far, far less for it, so the government would extract far less money from them for that spectrum. So "selling" the spectrum under long-term leases means more $$$ for the government vs. trying to "rent" it year-to-year.

Re:Government picking favorites

[schnell]

Well, to begin with, if the big players want that bandwidth they'll just buy whoever buys it. Problem solved.

What if Sprint or T-Mobile buy that spectrum? AT&T already tried to buy T-Mobile and was shot down by the DOJ, so it's silly to think that the big two could buy either T-Mo or Sprint in order to get that spectrum. With set-asides, T-Mobile and Sprint are in effect having their cost of doing business being subsidized by taxpayers, which - depending on your view of competition in cellular - may or may not be worth your taxpayer dollar.

Re:Government picking favorites

[fuzzyfuzzyfungus]

Wireless is no substitute for wireline, this much is undeniable.

How, though, is it relevant to a discussion of how to divide scarce spectrum between competing wireless use cases(doubly so when both of them inhabit markets shaped in part by a semi-substitutable wireline implementation of the service they offer)?

The question isn't whether wireless is the future (it isn't, and anybody who says it is is probably lying to save on capital investments) but whether broadcast television is the best use of an unfortunately finite natural resource; and, if it isn't, whether we owe broadcasters some sort of dignified exit strategy or whether we can just kill them and get on with our day.

Personally, I'd be the first to agree that the default 'Sell to Ma Bell or The Exaflood will eat your babies or something, something' policy is utter bullshit. Given the notable successes of ISM-band wireless protocols, despite the fact that the ISM band is kind of a slum, I'd advocate letting the poor telcoes suffer with their 4G and allocating more relatively unencumbered spectrum.

However, I'd also be the first to axe broadcast television as an institution, leaving not one transmitter upon a tower, to free up that additional spectrum. Broadcast TV is a howling wasteland and its arguments that it offers some sort of valuable public service aren't exactly getting more convincing as time goes on.

Re:Government picking favorites

[fuzzyfuzzyfungus]

Don't forget market power: something that no sane individual trusts a telco to exercise benignly, and which even ardent free-marketeers recognize as pernicious if abused.

If fatty were benevolent, well liked, and known for fairness and decency, there'd be no reason to kick him out just for being the fat guy. However 'benevolent', 'well liked' and 'known for fairness and decency' are not concepts you associate with the phone company. Terms like 'smirking, sociopathic fuckweasels' more usually come to mind. You don't want any of them getting their hands on more market power than absolutely cannot be avoided.

Re:Government picking favorites

[evilviper]

You're quite wrong about broadcast television. With the switch to digital, it has gotten vastly more useful and practical.

Now, putting-up an antenna is the best picture quality you can get. Most stations have 2+ subchannels, so instead of 7 channels, you get 21+, and hence a proliferation of minor networks... "AntennaTV" "THIS" "MeTV" and more come to mind. And they have a far greater signal-to-noise ratio than cable channels, due to limited space and the demands of a massive broadcast audience. In some secondary (ie. old UHF-only) markets, major networks were entirely missing, due to limited space, but are now able to be carried as sub-channels on competitor's broadcast towers.

OTA broadcast viewership is increasing, mainly with young households opting for an antenna rather than cable/satellite, ssince those have lost their technical edge, and the price is hard to justify. And OTA is critical for TV-related companies... Those TV-tuners for computers wouldn't have a. big enough market without it, and no reason to exist. DVR companies also probably wouldn't be able to make it without the OTA crowd. Startups like Aereo would be gone, with no possibly legal source of content.

And tell me this... Where can you find daily national/world news with the same quality as the approx. 4am newscasts on CBS/NBC/ABC? BBC World Service looks like crap by comparison, though easily better than CNN/MSNBC/FauxNews of course. How about educational content like the broadcast networks are required to air for children? We absolutely do get a hell of a lot from broadcast OTA TV.

Re:Government picking favorites

[Ginger Unicorn]

Aren't mergers and buyouts of that kind monitored and regulated?

"Government shouldn't pick winners in markets!"

[jeffb (2.718)]

"Winners should pick winners in markets."

-Winners in markets