Martin’s Open Access Plan Seems a Good Step, Says EchoStar

EchoStar might bid with another company, hoping to provide broadband nationwide using 22 MHz of spectrum, Goodfriend said. Although 700 MHz transmission speeds will be slower than those of wireline networks run by cable and phone companies, consumers seem willing to accept slower download times in exchange for portability, he added. “We're ready to build out, we're ready to make those investments” to start such a service, he said. “We put our money where our mouth was with AWS,” he said, referring to a 2006 advanced wireless service auction that raised $13.7 billion. EchoStar and DirecTV, working together, quit bidding when prices got too high.

Regardless of the rules, four MMTC panelists agreed minorities likely will face many challenges in bidding (CD July 17 p1) because bids require so much money. Officials from Council Tree, CTIA, EchoStar and M2Z generally agreed the FCC does not do enough to help small businesses and minorities participate. Speakers split along business lines in analyzing why small companies may have trouble competing with major telecom companies in the auction, expected to raise more than any other such sale.

The open access proposal for a wide swath of spectrum could make it harder for minorities and small businesses to participate, said Paul Garnett, CTIA assistant vice president. He said large, cash-heavy companies may be dissuaded from bidding on the 30 MHz that Martin wants to set aside for open access, instead training their sights on the rest of the spectrum. That could raise the price and hurt small companies, he said. “What it does is turn a 60 MHz auction into a 30 MHz auction and increases competition for that finite resource,” he said. “That is not a good thing for smaller entities,” which seem most interested in licenses for smaller areas not subject to rules letting any device connect to it, said Garnett. He expanded on a Monday letter CTIA sent the FCC (CD July 17 p15).

Another small-business hurdle Garnett identified is the risk that the FCC will require winning bidders for blocks of spectrum of a specified size to build out wireless services to large geographic portions of those areas. It seems more fair to set build-out rules requiring spectrum winners to serve a set percentage of households in an area, Garnett said in an interview. “You're going to have challenges going into an auction” for designated-entity (DE) small-business participants, he said. “Just the fact that you have a geographic buildout on those licenses,” he said, “places them at a competitive disadvantage.” Open access rules aren’t necessary for bidders of any size, Garnett told MMTC. “Carriers are already experimenting with open access-type items, and not because a regulator told them to do it.” A major carrier may adopt “an open architecture model” on its own, he added. “I don’t think we know yet what the FCC means by open access.”

If AWS bidding is any indication, small businesses will be hard-pressed to participate in the 700 MHz auction, said other MMTC panelists. DEs “fared terribly” in 2006, said Council Tree Senior Vice President Jonathan Glass. He said Denali Spectrum was the only minority-owned designated entity to win AWS spectrum, with net provisionally winning bids of $274.4 million representing just 2 percent of the total take. “More DEs mean more competition in the auction, which drives higher revenue,” said Glass. He said he fears no minorities will take part in the 700 MHz auction. Goodfriend said DE participation is good, but “we ought to have a DE system that actually works, that is not a subterfuge.” An AWS auction requirement that DEs hold spectrum for 10 years before selling it killed the only FCC program left for minorities, said MMTC Executive Director David Honig. “You're not going to be able to generate any investments,” he said. “That’s what’s being proposed for that beachfront property.”

M2Z CEO John Muleta vigorously debated other panelists about whether the spectrum really is prime real estate and whether prospective bidders should reveal more about what they would do with it. “I just want a definition of ‘beachfront property.’ Is it North Carolina beachfront property or is it Newfoundland?” CTIA’s Garnett said companies should not have to disclose plans. Muleta said costs of $2 billion to $4 billion to start a nationwide wireless network, excluding license fees, makes participation prohibitively expensive for some. “What we need are people who are building networks,” he said. “Open access is a direct result of net neutrality, which is a direct result of lack of competition in broadband.”

The FCC should tread carefully in letting unlicensed devices operate near TV spectrum as broadcasters prepare to vacate 700 MHz frequencies in February 2009, National Association of Broadcasters President David Rehr said on another MMTC panel. High-technology companies seeking to use unlicensed devices in so-called white spaces can use “fixed” devices for broadband in rural areas, Rehr said, adding that letting companies use white spaces during the digital TV transition would be a mistake. “It would increase the level of complexity, misunderstanding, confusion,” he said. “I just think it would make everything a lot worse.” Unlicensed white space devices is “really about selling a lot of toys in big cities,” not broadband deployment, he added.

Andrew Schwartzman, Media Access Project president, predicted a problem-plagued DTV transition because Congress did not allot enough money for consumer education. “It is simply not realistic to expect the private sector to do what is needed,” Schwartzman said. “It’s not going to work very well, and when we come to 2009 and the transition actually takes place you are going to have a significant gap, I fear.” NTIA, Consumer Electronics Association and National Cable & Telecommunications Association officials disagreed, saying industry efforts will suffice. NTIA got $5 million to educate consumers, versus as much as $1.5 billion to give people vouchers for digital converter boxes. NTIA Administrator John Kneuer said Congress intended that “the lion’s share of the consumer education was going to be performed by the people at this table and in the room.” - Jonathan Make