RCA Paper Pushes Economic Case for 700 MHz Interoperability Rules
The Rural Cellular Association turned up the heat on the FCC and Congress in an effort to get them to mandate device interoperability across the 700 MHz band, releasing a study by Information Age Economics on the economic effects of doing nothing (http://xrl.us/bmhsag). RCA filed the report Thursday with the Joint Select Committee on Deficit Reduction, which is expected to consider spectrum auctions as a way to raise revenue to lower the deficit.
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Only the largest wireless carriers, AT&T and T-Mobile, stand to benefit if interoperability rules are not imposed, the report said. “A key factor that affects the prices paid for auctioned spectrum is the number of financially qualified bidders who are motivated to participate,” the paper said. “Non-interoperability across a band discourages all but the largest existing operators from bidding. Other bidders recognize that the spectrum they may acquire will be non-interoperable with spectrum held by the Big Two.”
"If our object is to grow the pie ... interoperability is necessary,” said Barry Goodstadt, an author of the report. More 700 MHz spectrum is likely to come online, but smaller carriers won’t bid unless devices are readily available, he said. “This cuts into the likely federal budget revenues.”
"It’s clear that innovation is affected by this,” said RCA President Steve Berry during a press briefing on the report. “Innovation comes from our smaller carriers and the competitive carriers. We have demonstrated this time and time again.” RCA General Counsel Rebecca Thompson conceded that the FCC may be reluctant to hand down regulations in this case. “As our economists have said, there’s a market failure here,” she said. “When there’s a market failure the commission needs to regulate.”
Berry noted that the FCC mandated that CMRS interoperability to speed development of early wireless markets. “We got away from the tradition in the 700 MHz band,” he said. Small carriers are worried that without an interoperability mandate manufacturers won’t make affordable handsets for Band 12, covering the spectrum they bought in the 700 MHz auction. The spectrum AT&T and Verizon Wireless bought in the 2008 auction is primarily in Bands 13 and 17 (CD Oct 8/10 p1). The FCC held a workshop in April to examine the issue (CD April 27 p1).