Hear Me Now: Competitive Auctions Needed

Zack Christenson Research Fellow, American Consumer Institute
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This past Friday, in a 5-0 vote, the FCC gave approval to begin the process of conducting incentivized spectrum auctions. This has been in the works for months, triggered by the Jobs Act that was passed earlier this year that allowed the FCC to start exploring the option to conduct the auctions.

The auctions will allow television stations with unused spectrum to voluntarily sell it off while being allowed to keep a portion of the proceeds. The FCC also decided to review the rule currently in place on the screening of spectrum purchases and whether they should be strengthened in the face of allegations of a forming duopoly from AT&T and Verizon. Putting a strong cap on the amount of spectrum a provider owns could be an option.

For the next several months, the FCC will be soliciting comments from the public on the new proposals.  One group sure to have input is the Competitive Carrier Association (CCA), a collection of smaller wireless providers including Sprint, T-Mobile and dozens of regional carriers. The consortium of carriers is upset with the way the last spectrum auction was conducted and wants the FCC to impose new regulations on the upcoming auctions that would make them less competitive and more favorable to smaller carriers.

They’d like to see more regional auctions and no nationwide licenses sold, something that would favor the smaller carriers. They’d also like to see tighter restrictions on the spectrum cap, meaning AT&T and Verizon would be limited in how much they’re allowed to purchase. Revising the spectrum cap could also put different rules in place in how spectrum is measured—meaning that some spectrum wouldn’t count for as much towards the cap as others.

But a truly competitive auction is the only way to go, and is the only way to ensure that the interests of consumers are best being served. Spectrum is in short supply, with every wireless provider scrambling to acquire as much as possible.

So why should the consumers of smaller carriers benefit while those of the larger carriers suffer with sub-par quality and service? The regional auctions that are held, just as they were held with the last auction, will ensure that smaller carriers who operate in regional markets will have just as much shot at spectrum as the larger players— companies will pay what it’s worth, which is the point of an auction. Size, in this case, won’t matter.

Attempts to impose tight caps on spectrum purchases are equally worrisome. As Hal Singer at Forbes writes, imposing the cap ignores the fact that all companies need more spectrum to survive, as the coming spectrum crunch looms. And, he points out, it could work to degrade service for the larger carriers as AT&T and Verizon, under a strict cap that many want to see, would probably have met their limit.

These regulatory requests coming from the CCA seem to be “rent-seeking” disguised as a request for fairness. Although many claims are made for a “level-playing field,” the CCA and its members are requesting a government agency to handicap a competitor for the purposes of gaining an advantage. While they claim they are not asking for a handout, the regulatory solution they seek would provide just that.

Zack Christenson is a digital tech writer for the American Consumer Institute Center for Citizen Research, a nonprofit educational and research organization.  For more information, see www.theamericanconsumer.org.

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Zack Christenson