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Where to next for the FCC?

crossroads

Tuesday was a big day for the FCC.  The Senate Commerce, Science and Transportation Committee held an oversight hearing with all five Commissioners, the same day that reply comments were due on the design of eventual “incentive auctions” for over-the-air broadcast spectrum.  And the proposed merger of T-Mobile USA and MetroPCS was approved.

All this activity reflects the stark reality that the Commission stands at a crossroads.  As once-separate wired and wireless communications networks for voice, video, and data converge on the single IP standard, and as mobile users continue to demonstrate insatiable demand for bandwidth for new apps, the FCC can serve as midwife in the transition to next-generation networks.  Or, the agency can put on the blinkers and mechanically apply rules and regulations designed for a by-gone era.

FCC Chairman Julius Genachowski, for one, believes the agency is clearly on the side of the future.  In an op-ed last week in the Wall Street Journal, the Chairman took justifiable pride in the focus his agency has demonstrated in advancing America’s broadband advantage, particularly for mobile users.

Mobile broadband has clearly been a bright spot in an otherwise bleak economy.  Network providers and their investors, according to the FCC’s most recent analysis, have spent over a trillion dollars since 1996 building next-generation mobile networks, today based on 4G LTE technology.

These investments are essential for high-bandwidth smartphones and tablet devices and the remarkable ecosystem of voice, video, and data app they have enabled.  This platform for disruptive innovation has powered a level of “creative destruction” that would do Joseph Schumpeter proud.

Mobile disruptors, however, are entirely dependent on the continued availability of new radio spectrum.  In the first five years following the 2007 introduction of the iPhone, mobile data traffic increased 20,000%.  No surprise, then, that the FCC’s 2010 National Broadband Plan conservatively estimated that mobile consumers desperately needed an additional 300 MHz. of spectrum by 2015 and 500 MHz. by 2020.

With nearly all usable spectrum long-since allocated, the Plan acknowledged the need for creative new strategies for repurposing existing allocations to maximize the public interest.  But some current licensees including over-the-air television broadcasters and the federal government itself are resisting Chairman Genachowski’s efforts to keep the spectrum pipeline open and flowing.

So far, despite bold plans from the FCC for new unlicensed uses of TV “white spaces” and the  passage early in 2012 of “incentive auction” legislation from Congress, almost no new spectrum has been made available for mobile consumers.  The last significant auction the agency conducted was in 2008, based on capacity freed up in the digital television transition.

The “shared” spectrum the agency has recently been touting would have to be shared with the Department of Defense and other federal agencies, which have so far stonewalled a 2010 Executive Order from President Obama to vacate its unused or underutilized allocations.  (The federal government is, by far, the largest holder of usable spectrum today, with as much as 60% of the total.)

And after over a year of on-going design, there is still no timetable for the incentive auctions.  Last week, FCC Commissioner Jessica Rosenworcel, speaking to the National Association of Broadcasters, urged her colleagues at least to pencil in some dates.  But even in the best-case scenario, it will be years before significant new spectrum comes online for mobile devices.  The statute gives the agency until 2022.

In the interim, the mobile revolution has been kept alive by creative use of secondary markets, where mobile providers have bought and sold existing licenses to optimize current allocations, and by mergers and acquisitions, which allow network operators to combine spectrum and towers to improve coverage and efficiency.  Many transactions have been approved, but others have not.  Efforts to reallocate or reassign underutilized satellite spectrum are languishing in regulatory limbo.  Local zoning bodies continue to slow or refuse permission for the installation of new equipment.  Delays are endemic.

So even as the FCC pursues its visionary long-term plan for spectrum reform, the agency must redouble efforts to encourage optimal use of existing resources.  The agency and the Department of Justice must accelerate review of secondary market transactions, and place the immediate needs of mobile users ahead of hypothetical competitive harms that have yet to emerge.

In conducting the incentive auctions, unrelated conditions and pet projects need to be kept out of the mix, and qualified bidders must not be artificially limited to advance vague policy objectives that have previously spoiled some auctions and unnecessarily depressed prices on others.

Let’s hope today’s oversight hearing will hold Chairman Genachowski to his promise to “[keep] discussions focused on solving problems, and on facts and data….so that innovation, private investment and jobs follow.”  We badly need all three.

(A condensed version of this essay appears today in Roll Call.)