Jason Llorenz
+ FollowWill Policymakers Botch Mobile Auctions?
First the good news: The Federal Communications Commission is gearing up to auction portions of the nation’s airwaves for wireless use. This is the Commission’s first auction since 2008 and its success is vital. What’s at stake is nothing short of our ability to continue the social and economic progress made possible by our mobile revolution.
Now the bad news: with much at stake in these auctions, we may face poor policymaking that could jeopardize their success. Whatever legislation the Congress passes must accomplish a few goals:
1) Auction authority should be sufficiently tailored to avoid further delay resulting from judicial review; and
2) The auctions must actually help Latino businesses by spurring investment and innovation, and address the spectrum crunch that threatens Latinos and other communities who have most benefitted from the expansion of wireless services.
As background, these auctions will include portions of wireless spectrum being vacated by TV broadcasters. The FCC’s goal is to allocate more spectrum to mobile communication so our webpages load faster and our calls go through the first time. So far, so good.
But here’s the issue: Instead of opening the auctions to all companies that can afford to participate, some seem to favor “auctions” which limit who bids and who doesn’t.
Remember, the proceeds of winning bids go to the U.S. Treasury– needed revenue to address America’s hefty budget deficit and fund our national priorities. Conducting auctions deliberately structured to bring in less revenue to the American treasury may not be a good place to start.
The FCC has treated spectrum similarly in the past to mixed results.
Back in 2008, for example, the FCC succumbed to pressure from Google and a host of self-styled “consumer” groups and decided to impose conditions on the use of a portion of the airwaves called C Block. That action drove away potential bidders and resulted in a loss of billions of dollars to taxpayers. The uncertainty associated with the FCC’s C Block “open handset” conditions devalued the spectrum and reduced the proceeds of auction.
Even more depressing were the mid-1990s PCS C Block auctions in which only companies cherry-picked by the FCC were allowed to bid. If a company wasn’t on the list, they couldn’t bid (For background on the FCC’s “designated entity” program, click here).
What happened? More than half of the nearly 500 airwave licenses in that “auction” were returned for non-payment. Meanwhile, licenses held by that year’s big winner, NextWave, wound up in years of bankruptcy litigation that went all the way to the Supreme Court, ultimately costing taxpayers additional billions.
Now look at the potential human cost. The Digital Divide is still with us. For many, especially Latinos, wireless is helping to bridge that divide. (For more about that, click here.) But no one will be helped if this auctioned spectrum lies unused for years because the winning company doesn’t use it.
We’ve become a nation that revels in smartphones. More than 30 percent of America’s households have only wireless phones, according to a federal report last December. Among the 25-29 age group, that figure is an eye-popping 58%.
These wireless auctions, likely to take place in 2013, are too important to be poorly designed. There is far too much at stake — for Latinos, for the nation as a whole and for anyone depending on wireless to close the Digital Divide.
Jason A. Llorenz, Esq. is Executive Director of the Hispanic Technology and Telecommunications Partnership (HTTP) www.httponline.org
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4 Responses to Will Policymakers Botch Mobile Auctions?
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Libertarian from IN says:
The government *does* have a tendency of cherry-picking auction candidates. On top of that, who's got the most money to put in the highest bids? The "loss leaders" I mentioned earlier I have a feeling are going to be gouging the auction for everything it's worth, since they don't care, they have profits out the wazoo they can freely spend. And if they don't feel competent sitting in the auction room, they can at least buy a few politicians to make the rules are written such that they are favored. Lastly, as the article says… this really isn't a Latino-American issue, it's an *American* issue with all Americans who are wireless consumers and distributors at stake, and an opportunity for us to be held hostage further by the largest telecoms, and decreasing freedom in the wireless free market. If this potential behavior is the reason that the executive branch feels that auctions are bad, then I guess I can reason, although to my knowledge, Obama & Co. haven't said anything yet (surprise). Then again, I also don't like the executive branch making decisions this sweeping, but with our lawmakers the way they are, it seems that the power concentration hold of the Obama administration is equal to (535/2 + # of cabinet members), meaning a congressional decision utilizing both houses would only be about 5 times as fair. If we're lucky. X(
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Wm_Tucker says:
In practical terms I'm not sure it's possible to make an already bad policy worse.
However, congressional action is neither needed nor warranted here. The FCC has the capacity and authority to craft responsible solutions that best serve the public good without much political interference.
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Good and educational article. Thanks Jason. What so many people miss is the importance of this industry to the growth of the economy. Through my organization, we have thousands of small business members and almost none of them conduct business without wireless, mobile broadband through smartphones, which, most of us also forget, have only become extremely popular since the FCC held its last auction. Clearly they are behind the times, but with articles like this spreading the importance and educating the public, hopefully they will be pressured to catch up.