FCC opens the door

The Federal Communications Commission took an important step toward greater wireless competition and innovation when it approved on Tuesday the rules that will govern the next, and last, major spectrum auction. Two items, in particular, stand out.

The first is a promising public-private partnership. The private company that purchases a spectrum block adjacent to one designated for public safety would take responsibility for building out a nationwide network in exchange for access to the public-safety block. During an emergency, public safety could command as much bandwidth as it needed; when not needed, however, it could be used for commercial purposes. This is a proposal backed by newcomer Frontline Wireless, which intends to bid for the designated nationwide 10 MHz block. Public safety, including police, paramedics and other first responders, would benefit from an advanced, interoperable and nationwide network that would be financed not by taxpayers, but by the private sector. Low frequency spectrum is ideal for this use; it can penetrate walls, and because it requires fewer towers, it can provide better coverage in rural areas.

The second is the FCC’s decision to attach an “open access” requirement to one-third of the spectrum that it will auction. Currently, established wireless providers can maintain control of what devices are used on their networks — Apple’s much ballyhooed iPhone, for instance, is only available on AT&T’s network. No such restriction will be permitted for whichever company purchases those blocks. (AT&T, in contrast to its biggest rival, Verizon Wireless, actually supported the open-access provision.)

FCC Chairman Kevin Martin earlier this year called this auction the “biggest opportunity” to enable the creation of a “third broadband pipe” — high-speed wireless broadband, which would compete with cable and DSL. The best way to ensure such a development, several companies including Google argued, was to require that the winning bidder for certain blocks of spectrum be required to sell access at wholesale rates, but the FCC declined to adopt this provision.

If a company like Google, with the financial clout to bid competitively against the established telecoms, decided to enter the auction despite the lack of a wholesale provision, nothing would prevent it from later selling access at wholesale rates. It would, however, face a difficult uphill battle against incumbents willing to pay more than market value at auction.

With these rules, the FCC has set a sound foundation. Whether it entails more choice and more innovation will ultimately depend on which companies walk away from the auction with control of the spectrum. If the auction had been conducted according to the same rules as previous auctions, however, America’s wireless industry would have likely been cemented as a duopoly.