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A Case Against Further Government Spectrum Auctions
dkatana points out an article arguing that the governments should stop further auctions of 4G spectrum because it reduces infrastructure investment from carriers and makes net neutrality more difficult to regulate. Quoting:
The FCC recently raised more than $34 billion for six blocks of airwaves, totaling 65 megahertz of the electromagnetic spectrum. This is good news for the treasury coffers, but government auctions threaten the ability of the FCC and similar agencies to manage the spectrum, impose net neutrality rules, and allow new businesses to compete.
Carriers and internet companies who won the auction might believe the spectrum is theirs to do as they please, blocking access or charging huge fees to others. Issues such as speed throttling and preferential access come to mind. If governments insist in auctions of the newly available frequencies, it could hurt the industry and potentially destroy any possibility of negotiating universal access and net neutrality.
Carriers and internet companies who won the auction might believe the spectrum is theirs to do as they please, blocking access or charging huge fees to others. Issues such as speed throttling and preferential access come to mind. If governments insist in auctions of the newly available frequencies, it could hurt the industry and potentially destroy any possibility of negotiating universal access and net neutrality.
This is the same silly logic FCC chief Wheeler used to in his blog post back when he advocated the T-Mobile + AT&T merger. It basically sums up as this:
"It we just give them some stuff then they will be ok with us regulating them"
How about the FCC just do it's fucking job? Regulation should not require give and take with the industry, that's exactly how regulation can go wrong.
meep
Spectrum is a natural monopoly (for that particular spectrum). Much in the way that real estate is a natural monopoly (for that particular patch of land). Giving a private party ownership in perpetuity of a natural monopoly breaks capitalism. A recurring cost needs to be added to encourage effective use. Property taxes accomplish that for real estate (when used properly, and not hijacked by the government as a source of revenue). If the property taxes are appropriate for the location, people making effective use of the land are able to pay it with little pain. People not making effective use of the land (e.g. a strawberry farm in the middle of a city) are unable to pay, and thus are encouraged to either change how they're using the land to generate revenue more appropriate for the location's potential, or to sell the land to someone who can/plans to generate such revenue.
The same needs to happen with spectrum. The government shouldn't be selling it. It should be leasing it. Every 5-10 years, it should reappraise how much revenue all spectrum is generating, and the annual lease amount raised to something commensurate with that revenue potential. Companies which are doing a thriving business with that spectrum will be able to pay the increased lease. Companies sitting on the spectrum just to keep it out of the hands of their competitors will indirectly be paying their competitors (via the government, which should use the funds for enforcement and to encourage development of technologies that use spectrum). And companies struggling will be forced to adopt newer (hopefully better) business models to use the spectrum, or be forced to sell to someone else who can. If they can't make it work, someone else should be given the chance.
You can even get fancy to thwart corner cases. e.g. To discourage sitting on spectrum to block competitors, tie the annual lease to the amount that the spectrum is used. If it's utilized 75% or more, you get the normal lease. If it's 50%-75% utilization, you pay 1.5x the rate. If it's 25%-50% utilization you pay 2x the rate. Less than 25% utilization and you pay 5x the rate. To discourage monopolization of large amounts of spectrum by a few companies, increase the annual lease depending on how many blocks you're leasing. But it all hinges on leasing spectrum instead of auctioning it off.
so the government is just selling the spectrum without any preconditions, rules, regulations?
No, of course not. Frequency auctions may, or may not, be a good idea, but they have nothing to do with "net neutrality", and TFA is just a bunch of assertions with no explanation. I have seen better analysis from Bennett Haselton.
Carriers and internet companies who won the auction might believe the spectrum is theirs to do as they please
They might believe that regardless of how much they pay for the spectrum. Or they might not believe it but still act like they do. Both of which are irrelevant, because as long as there are rules, enforcement will be necessary, so just be prepared to enforce them and to hell with companies who are claiming they bought more than they paid for..
I'm not a fan of the carriers for the obvious reasons, but I have to play Devil's Advocate here and remind you all of how much money it costs to deploy equipment in all that spectrum. This is the reason why coverage is great in cities and poor in the countryside. Look how much spectrum T-Mobile and Sprint have over a huge geographical area and yet deploy over only a tiny percentage of it; supposedly T-Mobile will deploy more in rural areas where they can get 700 MHz spectrum, but I'll believe that when I see it. Likewise, in lesser (ranked 101+ or so?) metro areas, their network is a mess of technologies with 2, 3, and 4G all in the same city, and only barely-working 2G in some areas, including one (Kingman, Arizona) where T-Mobile is severely oversubscribed yet they won't put a dime into improvement.
So here's an idea I've had for years: pay less money for spectrum in exchange for current-technology coverage over your ENTIRE license area rather than just the big cities. I can't count how many people would love decent internet access and can't get it because the spectrum is all owned by companies who refuse to actually install equipment there: this practice should be illegal.
Sure, the leasing idea is probably the better one, but the roll-out cost of keeping up with the technology is far in excess of that. Also note that this argument isn't just about the cell/mobile bands but also all the other bands, especially as the phone companies continue to gobble up everyone else's spectrum--even us ham radio operators, where I expect the 9cm band (and possibly the 23cm band) will disappear within the next decade or two.
Oh, also, have any of you read how hard it will be coordinating with government stations on the AWS-3 band? There are numerous places where the band will likely never be able to be used by a carrier even though they're licensed for it.
Finally, remember that any price increase will ALWAYS be passed on to the customer--even phantom charges when they can get away with it ("Government Regulatory Recovery" charges, anyone?).
How about having the government properly regulate the peoples' bandwidth instead of just acting as an auction house and industry lobbyist. (Wheeler was and the last guy now has his job! tag team!)
Government should digitize and drive everything as packets. Become the infrastructure like the highway system. Charge rates for bandwidth use so anybody could be a cell company - since it just costs for packets over the network. Same with TV as well-- in fact, TV should have been done in a similar way. Sure it would have delayed the transition.... perhaps this is the next generation transition we should be designing today! Wide band devices which can use all the TV and cell bandwidth to send IPv6 packets or something similar. At least we could have physics and science manage the system instead of whatever the owners can hack together in their purchased space.
Note: I realize with the use of the loaded word "socialist" I've just lost most American readers.
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I agree. Auctioning creates a "pay to play" system. Spectrum is a fixed resource - it should be allocated based on social policy - not based on who can pay the most. And when someone pays for it, they have every right to feel that they "own" it - and that undermines the government's ability to manage it: to adjust rules as situations change over time. Auctioning a fixed public resource is nothing less than prostitution of our public assets.
It's not the wild west. Device in that category still have power and other requirements and must be type-certified by the FCC. The low power (really low propagation...) requirement is precisely what allows an "unlicensed" band to be able to exist, but is a hindrance to things like cell-phones or broadcast anything if you want to have good coverage without having to put stations literally everywhere.
I agree that for those purposes the spectrum should be leased rather than sold, though. It both provides a mechanism for us to evaluate whether a use continues to be valuable and to sunset particular uses (through choosing not to continue the lease after the term is up.) The leases should be auctioned, though.
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