Spectrum Aggregation Proposal Faces Opposition from Free-Market Oriented Groups

"My sense is regardless of how it’s labeled -- spectrum cap, bright line limits or something else -- there is likely to be substantial push-back from free-market advocates in the political ecosystem and some in industry to anything resembling a renewed imposition of a hard cap,” said Jeff Silva, analyst at Medley Global Advisors. “I think we got a taste of what’s to come in some of the cautionary reaction to the FCC proposal on spectrum holdings limits last Friday. The issue will definitely be a flashpoint and likely grow in intensity as the proceeding progresses."

"We seek comment on whether adoption of bright-line limits would serve the public interest now, and also on the specific costs and benefits of adopting such an approach,” the NPRM said (http://xrl.us/bnr7y9). “Bright-line limits could offer providers greater certainty, clarity, and predictability regarding which licenses they could acquire. ... On the other hand, a bright-line approach would limit the Commission’s flexibility to consider individualized circumstances and to respond swiftly to the changing needs of the mobile wireless industry and consumers. If we were to adopt bright-line limits, how could we do so in a manner that preserves our flexibility?"

The NPRM also asked about alternatives. “Are there other mechanisms for evaluating spectrum aggregation that would better serve the public interest and meet our statutory objectives?” it asked. The NPRM also questioned whether other spectrum should be included in the commission’s analysis, beyond the 700 MHz, cellular, PCS and Specialized Mobile Radio, “as well as AWS-1 and certain [Broadband Radio Service] spectrum, where available,” used in recent applications of the screen. “Should we continue to consider spectrum based on its suitability and availability for a given product market?” the NPRM asked. “Are there other factors that we should consider in determining whether particular spectrum bands are suitable and available for the relevant product market? We seek comment on any measures that might increase the transparency with which we determine what spectrum we would include in a case-by-case spectrum analysis or in implementing bright-line limits."

The NPRM cited comments by AT&T and Verizon as justification for the inquiry. “In recent years, large and small wireless providers, as well as trade associations and public interest groups, have requested that the Commission undertake an examination of its current policies regarding mobile spectrum holdings,” the NPRM said. “For example, Verizon Wireless has contended that we should reconsider the particular spectrum to be examined in a competitive analysis and has urged that we include additional spectrum bands. AT&T has expressed concerns that the current case-by-case evaluation is not clear and predictable and the spectrum screen changes from one transaction to the next."

Free State Foundation President Randolph May said the proposal is likely to be controversial. “While the FCC’s notice prefers to talk about ‘bright line limits’ rather than ‘caps,’ the import is exactly the same,” he said. “I understand why carriers, and others, are commending the commission for proposing a rule, rather than having the agency rely on a spectrum screen that has appeared to be subject to somewhat arbitrary manipulation. But ... I think the FCC should just leave the question of concentration of spectrum holdings to the antitrust authorities to be considered based on established antitrust jurisprudential principles."

The Information Technology and Innovation Foundation’s Richard Bennett questioned whether the FCC will opt for caps. “The FCC is being pressured by the so-called public interest community to bring back the caps in order to increase competition, but the FCC isn’t inclined to go that way,” he said. “Part of the problem is that the neediest cellular carrier, Sprint, is fairly drowning in excess spectrum through their Clearwire subsidiary, so limiting AT&T and Verizon’s spectrum holdings doesn’t really help [Sprint]. The only way a cap helps Sprint is if it makes arbitrary distinctions between spectrum of similar quality in the 700 MHz and 2.3 GHz bands, which isn’t really supportable as anything but market manipulation."

But Public Knowledge Staff Attorney John Bergmayer said he saw no reason why the FCC shouldn’t ask questions as it does in the NPRM. “The FCC is asking questions about a variety of approaches, that range from bright-line rules to a case-by-case approach,” he said. “This is normal in a rulemaking. It’s hard to understand why someone would object to this -- especially when the FCC has been criticized for not examining its spectrum policies in a more formal context.” Antitrust offers “a good tool for dealing with the behavior of firms that are already dominant,” Bergmayer said. “It’s not necessarily the right tool for the job when it comes to pure spectrum issues. Spectrum holdings are related to market share but in complex ways, and issues like the relative propagation characteristics of different spectrum bands are plainly an issue for the FCC and not antitrust enforcers. Spectrum policies should prevent competition problems from arising to begin with. In any event, pointing to antitrust as preferable to regulation -- but then opposing any proposed antitrust enforcement -- is a typical D.C. shell game."

"Allowing one or two carriers to snap up all of the spectrum and dominate the market doesn’t lead to economic growth,” said Free Press Policy Director Matt Wood. “Anyone who thinks that it does must not have looked at his wireless bill lately. The commission has a broader public interest mandate than the antitrust enforcement agencies, to be sure; but promoting competition is still a key part of fulfilling that mandate, because competition helps to drive prices down and service quality up. And no carrier can compete effectively without access to the public airwaves. That’s why we need a more rational screen that looks not just at the sheer amount of spectrum a company holds, but also accounts for its value in building a mobile broadband network."

The FCC rightly got rid of caps under President George W. Bush, said Seton Motley, president of Less Government. “The Barack Obama administration wishes to reimpose them -- but to do so while avoiding the onus that accompanies the term,” Motley said. “So we will get spectrum caps in all but name. ... Wondering why our nation is still mired in economic stagnation -- and likely headed towards a double dip recession? It is because the Obama administration has placed myriad such ‘bright-line limits’ all over our economy."

"It’s worth noting that revisiting the cap should not be viewed in isolation but rather seen in the broader context of how the FCC may want to reset spectrum policy at a time when various proceedings are in play to free up more airwaves to accommodate unrelenting data demand in the mobile broadband space in a way that doesn’t unwittingly undermine competition policy aspirations,” Silva said. “It’s a tough, unenviable task facing federal regulators."