US Wireless Spectrum Allocation: What are the Implications for industry, policymakers, and the consumer?

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Discusses the experiences of the recent spectrum auctions in the US and asks if the process was optimal

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US Wireless Spectrum Allocation: What are the Implications for industry, policymakers, and the consumer?

  1. 1. Wireless Spectrum Allocation: What are the Implications for Industry Players, Policy Makers, and the Consumer? Sara F. Leibman Director, Federal Regulatory Affairs November 18, 2008
  2. 2. The U.S. Experience: Have Auctions Worked? <ul><li>First some facts…. </li></ul><ul><li>AWS-1 Auction Results </li></ul><ul><ul><li>$13.9B (Net $13.7B) Auction Proceeds </li></ul></ul><ul><ul><li>104 Winning Bidders (57 “Designated Entities”) </li></ul></ul><ul><ul><li>$0.58 Average MHz POP </li></ul></ul><ul><ul><li>T-Mobile was top bidder, approx. $4.2B for 120 licenses </li></ul></ul><ul><li>700 MHz Auction Results </li></ul><ul><ul><li>$19.2B (Net $18.96B) Auction Proceeds </li></ul></ul><ul><ul><li>101 Winning Bidders (56 “Designated Entities”) </li></ul></ul><ul><ul><li>$1.28 Average MHz POP </li></ul></ul><ul><ul><li>VZW and AT&T won lion’s share of spectrum – over 70% on MHz POP basis </li></ul></ul><ul><ul><ul><li>VZW bid $9.36B for 109 licenses – 57% of spectrum on a MHz POP basis </li></ul></ul></ul><ul><ul><ul><li>AT&T bid $6.6B for 227 licenses – 14% of spectrum on a MHz POP basis </li></ul></ul></ul><ul><ul><li>But … D Block left unsold </li></ul></ul><ul><ul><li>And C Block likely would have attracted much higher bids had it not been for “open access” obligations </li></ul></ul>
  3. 3. Lessons That Should Have Been Learned (but may not have) <ul><li>Overlaying auction with excessive conditions means: </li></ul><ul><ul><li>Tepid bidder interest </li></ul></ul><ul><ul><li>Lower auction proceeds </li></ul></ul><ul><ul><li>Unsold licenses </li></ul></ul><ul><ul><li>Bankruptcies </li></ul></ul><ul><ul><li>Winners that can’t provide service </li></ul></ul><ul><ul><li>D Block Déjà Vu </li></ul></ul><ul><li>New Administration’s challenge will be how to hold market-based auctions in era of increased concentration </li></ul><ul><ul><li>Spectrum caps? </li></ul></ul><ul><ul><li>Eligibility restrictions? </li></ul></ul><ul><ul><li>“ Designer” auctions? </li></ul></ul>
  4. 4. Have Auctions Worked? <ul><li>To borrow liberally from Winston Churchill . . . </li></ul><ul><li>Auctions are the worst way to assign spectrum, except for all those other ways that have been tried from time to time. </li></ul>
  5. 5. Open Access? <ul><li>Wireless industry is moving toward openness </li></ul><ul><ul><li>Android platform </li></ul></ul><ul><ul><li>Nokia Symbian OS </li></ul></ul><ul><ul><li>Verizon Wireless Open Development Initiative </li></ul></ul><ul><ul><li>Clearwire </li></ul></ul><ul><li>But movement is a result of competitive pressures not regulation. </li></ul><ul><li>Policymakers should step back and see what happens rather than pick business plan for providers. </li></ul>
  6. 6. Open Access ? <ul><li>Single-minded open access policy ignores conflicting pressures on wireless providers. </li></ul><ul><ul><li>Limited bandwidth – need to protect customers from “bandwidth hogs” </li></ul></ul><ul><ul><li>Still-developing market for small-screen content </li></ul></ul><ul><ul><li>Regulatory and legal pressure to control content </li></ul></ul><ul><li>Aim should be to avoid schizophrenic regulation. </li></ul><ul><ul><li>Protect children … but allow all applications </li></ul></ul><ul><ul><li>Prevent consumer fraud … but provision every Common Short Code request </li></ul></ul><ul><ul><li>Improve network reliability … but don’t manage network traffic </li></ul></ul><ul><ul><li>Spend billions of dollars at auctions … but don’t expect interference protection </li></ul></ul>
  7. 7. Potential Benchmarks/Lessons for Europe <ul><li>To meet the dramatically growing demand for advanced wireless services, regulators and industry must work together to ensure the allocation and efficient use of wireless spectrum. </li></ul><ul><li>Making key spectrum decisions now will have a significant positive impact on business, society and consumers over the next two decades. </li></ul><ul><li>U.S. experience with auctions for advanced wireless services, including the recent 700 MHz spectrum, offers valuable lessons as Europe moves forward to allocate its “digital dividend.” </li></ul>

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