Secondary Spectrum Sales an Important Option

Last week, National Association of Broadcasters President and CEO Gordon Smith said that completing the incentive auction by 2014 is unlikely given the complicated set of issues, including international coordination, developing a band plan, and the relocating of TV stations. He is most likely correct that the FCC’s goal of 2014 will not be reached. At CES Commissioner McDowell noted that far less complicated auctions experienced delay, so it is reasonable to expect that this, the most complicated spectrum auction ever undertaken, will be delayed as well. 

Smith expressed that "It's more important to get this done right than to get it done right now."  I couldn’t agree more, but consumers want more spectrum and faster networks yesterday.

The allowance of secondary spectrum sales and flexible uses of spectrum will aide significantly in enhancing the current spectrum we have available while consumers and businesses wait for the spectrum auctions to take place and the government reassess its use and holding of a valuable asset.

According to CTIA, “While spectrum fuels the wireless industry’s ‘virtuous cycle’ of innovation and competition, its impact on the nation’s economy is also significant. Analysts estimate that bringing 500 MHz of spectrum to market will increase U.S. GDP by $166 billion, add at least 350,000 new U.S. jobs, generate an additional $23.4 billion in government revenues and result in a $13.1 billion increase in wireless applications and content sales.”

A good example of secondary sales enhancing the market is the deal announced between Verizon Wireless and AT&T to exchange swaths of spectrum in order to enhance networks for at least 42 million people over 18 different states.  These secondary sales allow companies to bolster their networks and manage increased data traffic while waiting for government actors to iron out the details

While the Competitve Carriers Association, may contend that the wireless market is falling into a duopoly and that these moves are all in all bad for the consumer, I must disagree.  Not only have both Verizon and AT&T sold portions of spectrum to smaller companies, but the market is not a duopoly - Sprint, T-Mobile, Cricket, Metro PCS are not uncommon brands.

One could argue that because the value of a network increases as the number of users increase and since the financial and technical barriers to market entry are so high, a smaller number of competitors may create a healthier wireless market.

However, I don’t think one could argue that a duopoly does exist or, if it did, continue to exist.  Other corporations have made attempts to enter the wireless market with innovative solutions.  One example could be LightSquared’s plan to use a combination network incorporating satellite signals to build a competitive wireless network.

Another possible example may be Google, who recently submitted an application to the FCC asking for an experimental licensee to create a small-scale wireless network built for devices able to use frequencies from 2525 to 2625 megahertz.  While US commercial technology does not function on these particular bands, who is to say it couldn’t in the future with flexible spectrum licensing?

Secondary sales are important for companies to innovate and better serve their customers.  Secondary sales, like the SpecturmCo deal, gave Verizon access to additional spectrum that cable companies bought at the last auction, but were unable to utilize. Additionally, secondary sales could give a new venture, like the Google project, access to spectrum that a company holds but isn’t currently using.  With the limited resources that are available, and with likely delay to the spectrum auction and release of government held spectrum, secondary spectrum sales should not be hindered.  They should be applauded.

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