Spectrum Crunch Hype is No Scam

by Luke Pelican on November 2, 2011 · 1 comment

in Property Rights, Tech & Telecom

In a recent Washington Times op-ed, Mark Hyman of the Sinclair Broadcast Group makes some compelling arguments calling for a spectrum inventory. His suggestion that the NTIA and FCC fulfill their mandate from President Bush in 2003 to increase spectrum efficiencies is on point and laudable. It’s certainly true that plenty of spectrum currently sitting in government hands could be put to better use, and thus a part of the problem is spectrum management. But that’s about all Hyman gets right.

His assertion that the “looming spectrum crisis” is a ruse manufactured by FCC Chairman Genachowski and parroted by major cell phone companies is completely erroneous. Hyman points to “the only independent study” on this subject to support this claim, one conducted by Citigroup. That report claimed that cellular companies were using just a fraction of the spectrum assigned to them. Critics have since eviscerated the Citigroup report, pointing to its use of outdated figures and misunderstandings of mobile technology as the cause of its flawed and ultimately inaccurate conclusions.

Hyman also alludes to public statements from Sprint and Verizon as proof that no spectrum crunch exists. Yet this September Verizon’s CEO declared that the AT&T / T-Mobile merger “was kind of like gravity” and had to happen in part because of the government’s inability to get sufficient amounts of spectrum to carriers. Such a statement bolsters claims that we do in fact face a spectrum crunch.

The FCC was actually aware of this problem at least as far back as 2002, when the Spectrum Policy Task Force issued its report. That report detailed how FCC’s allocations of spectrum in 1994 were based on predictions that there would be 54 million mobile users by the year 2000. In 2000 however the number of mobile users was more than double that base amount; the authors explained that the FCC and industry “have significantly and consistently underestimated the need for additional spectrum and the public’s utilization of new technologies and applications.”

This trend has continued: a report by Cisco earlier this year indicated that smart phone traffic doubled from 2010 to 2011 and is projected to increase rapidly in coming years, increasing the strain on already buckling networks. That report also notes that as connection speeds increase, high-definition video and streaming consumption will increasing as well, consuming more bandwidth.

Despite this reality, Hyman suggests that mobile carriers should stop “hoarding” their spectrum. It’s unreasonable to expect that government can ensure that each segment of spectrum allocated to the private market will be immediately put to its most efficient use. For example, if someone buys a plot of land intending to build a mall, the mall won’t be built overnight. Development of a parcel of land necessarily takes time and resources, as there are transaction costs like construction permits and regulatory compliance that inflate the amount of time it takes to complete such a project.

Spectrum is not dissimilar. The labyrinthine nature of spectrum management over the past thirty years has meant carriers must incrementally gather spectrum blocks, integrate those blocks into existing network infrastructure and develop comprehensive plans for utilizing it. Like building a mall on a plot of land, integrating a block of spectrum into a network and putting it to use takes time and resources.

A perfect example of this complexity is DishNetwork’s recent acquisition of DBSD and Terrestar. The satellite TV provider purchased those companies and plans to combine the combined spectrum with its other holdings to roll out an advanced LTE network to compete in the mobile wireless market.

If you listened to the NAB’s version of events all you’d hear is that DishNetwork is hoarding spectrum. That simply isn’t the case. Nonetheless, NAB continues to insist upon a spectrum inventory before any of their precious broadcast spectrum is put up for incentive auctions.

A complete and accurate inventory of government, military, and commercial spectrum holdings would be useful in the long run, but it would not benefit mobile users who rely on already strained networks for phone and Internet services. Instead it would simply provide more time for broadcasters to continue their inefficient and antiquated model of spectrum usage.

Hyman compared the spectrum crunch fears to global warming hysteria. Reading his piece I was reminded of Luddites who feared the changes brought about by the Industrial Revolution. Spectrum is scarce, and mobile carriers are providing services to meet increasing consumer demand. We need to move away from legacy communication and focus spectrum allocation on the future of mobile telephony and broadband. To do otherwise is what would be truly regrettable.

VINCENT D. MCBRIDE November 2, 2011 at 11:39 pm

A business practice of using their dominance in the market to control the development and production of mobile devices that will only work in the 700MHz. spectrum band they hold. Anti-competitive behavior in a attempt to suppress the competition by using its influence and power to manipulate the access and availability of mobile devices. One must question this premeditated objective to slow the competition down with incompatible 700 MHz. bands. Behavior that reaches the outer boundaries of responsible business ethics. The Commission has an obligation as regulators of the industry to enforce policies that protect small business from the
harmful side effects of such unfairness which undermines the very principals and
objectives of the Commission to promote competitiveness in the mobile industry.

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