FCC Not Convinced To Just Hand Over Spectrum To Startup In Exchange For Potential Future Profits

from the FCC-prefers-its-money-upfront dept

In May of 2006, a VC-backed startup called M2Z petitioned the FCC to hand over some spectrum for free in exchange for a cut of future potential revenues. As you're probably quite aware, the FCC has been focused lately on auctioning off slices of spectrum to private companies for use in various wireless projects. The spectrum seems to only be getting more and more valuable as demands for potential wireless applications and services increase. Of course, as we've seen in the past, these spectrum auctions don't always work out so well, with companies overbidding and being unable to actually do much with the spectrum. Part of the problem is that the FCC wants to put all sorts of rules on the spectrum usage, rather than letting it be used for whatever makes the most sense, like some other countries.

However, the M2Z proposal seemed pretty questionable in its own way, promising nothing up front, and then making plenty of promises on the backend. The company claimed it would cover 95% of the country in broadband in 10 years, would have a "free" tier that was relatively slow and filtered, a more expensive upper tier, as well as offering priority for public safety uses. It may have been intriguing simply for the fact that it was different, but the FCC wasn't convinced. As has been expected for quite some time, the FCC has rejected the proposal, though some believe that the debate over this topic may eventually lead to good things from the FCC with the spectrum it's going to release in the near future. Of course, in the end all this really highlights is that the FCC still is focused on dribbling out bits and pieces of spectrum using different rules and regulations each time -- rather than coming up with a truly comprehensive spectrum allocation plan. Of course, some of us have been pointing this out for years, and the FCC never seems to get any closer to a comprehensive spectrum allocation policy -- and the country continues to suffer for it.
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Filed Under: fcc, spectrum, spectrum auction, spectrum policy, wireless
Companies: fcc, m2z

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  1. identicon
    matt, 4 Sep 2007 @ 8:14pm

    net neutrality?

    Why is it that the FCC mandated 4 net neutrality requirements for wired internet is not followed for wireless? Everyone acts as if google asked for this uniquely but in reality google just asked for the same net neutrality rules on wireless and wired (the 4 requests).

    Is there an actual difference or reason for a differing opinion on net neutrality on wireless spectrum versus wired spectrum?

    reply to this | link to this | view in thread ]

  2. identicon
    Dave Burstein, 4 Sep 2007 @ 11:42pm

    Disagree about spectrum use


    "Part of the problem is that the FCC wants to put all sorts of rules on the spectrum usage" sounds reasonable, but in the real world is probably off target. There's very good reasons to put rules on spectrum, and it's one of the few tools available. Until spectrum sharing becomes the norm, spectrum is short and a few companies are exercising undue power. Cognitive radio technology is close, and can open things up, but until then, certain rules make sense to me.

    For example, AT&T and Verizon would simply outbid everyone else in the 700 megahertz auction, buying spectrum they don't need, just to keep out competitors in wireless. That may not work in the long term, but since we went from six to four wireless companies prices have actually gone up and the "producer surplus" increased by easily $4B a year. The access terms you're indirectly criticizing were designed to discourage those two from keeping others out.

    Looking a little deeper, the incumbents are collecting an economically wasteful "rent", even though much of their spectrum came to them free. Using spectrum policy to bring in more competition could dramatically lower consumer prices. I think that's worthwhile.

    If I weren't on deadline, I'd feed you more data. Please look at this one more closely. db

    reply to this | link to this | view in thread ]

  3. icon
    Mike (profile), 4 Sep 2007 @ 11:48pm

    Re: Disagree about spectrum use

    Hi Dave... always good to hear from you, though you may have misunderstood my point. I'm not talking about cognitive radio (which I'm not convinced is close, as you say), but about the FCC trying to pick and choose what each bit of spectrum should be used for without letting the market actually weigh in.

    I'm much more impressed by the effort in the UK to sell the spectrum and allow it to be used by the owners for whatever makes the most sense.

    I'm not against offering up more spectrum to try to increase competition -- but I don't think having the FCC set a bunch of rules is the way to do that. As for the problem of the big telcos sitting on the spectrum, I again have no problem with a use it-or-lose it type rule for spectrum allocation.

    But the point is that the current policy of dripping and drabbing out different pieces of spectrum, heavily laden with ridiculous rules (remember all those fake small companies bidding for spectrum that really represented big companies?) is really making a difference.

    reply to this | link to this | view in thread ]

  4. identicon
    RandomThoughts, 5 Sep 2007 @ 10:24am

    Mike, who decides what makes sense? If I were Verizon, it would make sense for me to use the spectrum for say backhaul or data and keep my current spectrum for voice. Of course, by doing so, Verizon would limit competition.

    How can you say "let the market decide" and then say that if it isn't used how you like, they would lose it?

    At the end of the day, the govt. wants to sell the spectrum. Its revenue. It helps pay off the debt.

    Also, I find it hard to believe that wireless costs have went up for consumers. Total billing may have went up due to the addition of data networks, ringtones and other things, but plans have gotten cheaper in both dollar amount and the additional talk time.

    reply to this | link to this | view in thread ]

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