from: Save the Internet [1]

Why the Airwaves Auction Matters

January 29, 2008
By Shawn Chang and TImothy Karr

Believe it or not, we’re eight years into the 21st century and more than half of the people in America have either no Internet access at home or are stuck on dial-up. In the meantime, countries in Asia and Europe have outpaced us with faster connections at far cheaper prices.

This situation is unacceptable, but there’s still reason to hope that we can regain our spot as a world leader in Internet services. Much of this rests on the outcome of a complex airwaves auction that began less than a week ago.

Up for sale is the “beachfront property” of our radio spectrum �” the most important chunk of the public airwaves to become available in years. If used right, these airwaves will form the building blocks of the next generation of Internet services in America �” which could put our country back on the top of the broadband heap.

So, what’s really at stake in the spectrum sell off? Our auction FAQ will help set the stage.

1. What is wireless spectrum?

The wireless spectrum is part of the invisible frequencies that we use to transmit television, radio, satellite and other communications signals. Because of its inherent scarcity �” there are only a limited number of channels available on the airwaves �” the Federal Communications Commission has the responsibility to manage the availability and use of such spectrum. Since 1993, the FCC has had the authority to organize auctions to award exclusive spectrum licenses for wireless communications services.

2. Why is the government auctioning off spectrum now?

In 2005, Congress passed a deficit reduction bill that set a definite date of February 17, 2009, to complete the transition from analog to digital television. It required television broadcasters to vacate the analog channels they currently occupy and instructed the FCC to auction off the newly freed up spectrum, known as the “700 band,” starting in January 2008. The auction began Jan. 24 and is expected to generate more than $10 billion for the government; over $7 billion of which will go toward deficit reduction.

3. Why is this chunk of spectrum important?

Since the FCC has already assigned specific licensees for most of our airwaves, the 700-band auction likely represents the last substantial and competitive auction for decades to come. And like over-the-air TV signals, the wireless signals transmitted within the 700 band are able to travel long distances and penetrate buildings and concrete walls, making them especially attractive for high-speed Internet services. One chunk of the 700 band, known as the “C Block,” will be available on a national scale �” allowing the license holder to knit together a wireless national broadband network unlike any other.

4. Why is the auction important to consumers?

If used right, the 700 band could change fundamentally the way Americans use the Internet. This prized spectrum has all the technical characteristics to make access to high-speed Internet easy for those on the road, on foot or traveling by air. Your mobile phone could become your primary point of contact to the Web, altering the ways you shop, bank, share videos, navigate city streets, experience music and connect with friends. Analysts are now predicting the “mobile Web” to be the next user revolution in communications. If we play our cards right and safeguard openness over the mobile Internet, these predictions could become reality.

5. Why is the auction important to the future of an open Internet?

Wireless and wired Internet services in America are dominated by a few companies that have a track record of stifling competition and new ideas, and an aversion to open networks. The FCC has mandated open access for those receiving license to the C Block of the 700 band. While the C Block is just a small chunk of nationally available spectrum, it can demonstrate the benefits of injecting much-needed competition and innovation into the stagnant wireless marketplace. The new FCC conditions are a step forward. An open and vibrant C Block might lead to openness over all wireless networks.

6. Why has America fallen behind the rest of the world?

Millions of cell phone users in Europe and Asia now use hand-held devices to surf the Web. In the United States, however, cell phone companies dictate nearly every aspect of our wireless experience, preferring a “walled garden” to Europe’s more open model. America’s closed system is largely the byproduct of poor oversight; the FCC has long granted to carriers like AT&T and Verizon almost complete control over the ways consumers access the airwaves. In Europe and Asia, policies forced carriers to open wireless networks and allow users far more flexibility �” connecting across networks with a choice of devices, services and applications. The proprietary approach of U.S. carriers has failed to foster similar competition, innovation and choice �” leaving American consumers a generation behind their foreign counterparts.

7. Who are the key players in the auction?

There are initially 214 approved bidders for the auction. The usual suspects include wireless companies such as Verizon, AT&T, Cricket, MetroPCS and Alltel; cable providers such as Cox and Cablevision, and satellite provider Echostar. Google also threw its hat into the ring, as did financial giants from other sectors such as Chevron USA.

8. How does the auction work?

The FCC has constructed a set of complicated rules for the auction. All approved bidders will be operating under “blind bidding,” in which bidders will not be able to know the names of their competitors, preventing collusion to exclude a third party. In addition to the C Block and its open access conditions, the FCC has reserved a separate “D Block” to provide a new, interoperable national network for public safety users that would also be shared with commercial users. The FCC has also designated other blocks of the 700 band for smaller local and regional area licenses. All of the winning bidders will be required to follow a set of build-out rules to extend their wireless coverage area over time.

9. What is the likely outcome of the auction?

While more than 200 firms have registered to bid, those wealthy enough to win a national license are few �” and, unfortunately, include the same phone giants that already control “wired” Internet access in America. Analysts expect Verizon and AT&T to win the bidding war over the largest single chunk of spectrum. This would position them to extend their control over U.S. Internet access to the wireless space. It would also undermine plans to inject new competition into America’s broadband marketplace. Placing the promise of the mobile Internet exclusively under the gatekeeper control of these companies is a chilling prospect. Google is one wild-card bidder that could alter the landscape. If it outbids the phone companies and wins access to the C Block, the Internet company has pledged to make “open access” a condition of its new mobile network.

10. What can the public do?

With a few exceptions, we have been blissfully free of gatekeepers on the wired Internet. But that won’t be the case in the wireless world �” unless we make it so. Last summer, more than a quarter-million Americans wrote the FCC urging open access to the 700 band. Since the auction rules were put in place, wireless companies like Verizon and AT&T have pledged to have more open networks. But we can’t leave open access up to the whims of incumbents whose businesses were built as walled gardens. A coalition of public interest groups is now urging the FCC to open all mobile networks �” not just the C Block �” but they need public support for the agency to act. It’s time to put choice and innovation in the hands of consumers.