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Analysis of Wireless Broadband Plan in 2nd Stimulus Package

While it was good to see that the Administration included telecoms in its new stimulus package—which was launched in September 2011—the concerns expressed when the project was announced last year still persist.

Wireless is not a solution to the significant broadband problems the USA is facing. As a shared technology this means the more users on the network the slower the system will be. This, then, creates the opportunity for the carriers to introduce capped prices, and soon wireless broadband will either become too expensive for most Americans or they will get a second-rate quality based on low speeds.

The new plan seems to be driven more by the failed attempts in previous initiatives to roll out more broadband infrastructure. Wireless plans were first pursued after the National Broadband Plan (NBP) was launched, but didn’t go anywhere.

In my view these are parallel developments—we need both mobile broadband and fixed broadband (ultimately fibre). In principle, the NBP addresses the fixed plan, but there is no action on that front. DOCSIS 3 networks will fill the gap for the time being, but longer term we will get a skewed development, which will not be a good one if. Nevertheless the American entrepreneurial spirit may kick in and eventually nationwide and affordable fibre may be rolled out.

As we have been saying for the past three years, none of these plans will be successful unless the US accepts some form of structural change to its telecoms environment. The market is totally dominated by AT&T and Verizon, and according to Bruce Kushnick, Chairman of Teletruth, and Executive Director of New Networks Institute they have proved to be all-powerful—nothing will pass Congress that has not been approved by these two companies.

Such monopolistic behaviour is hampering any development that would lead to a large-scale deployment of affordable high-speed broadband.

The risk is that a desperate Administration may apply most of the latest stimulus plan to the telco and cable vested interests, without any benefit to innovation, competition or affordable broadband access for all Americans. The Administration is in desperate need of money and the wireless plan needs to be funded through the spectrum auctions.

It’s difficult to clear already allocated spectrum, and spectrum auctions have always been used as a revenue raiser. In practice this means that AT&T and Verizon buy it all up in order to keep out competitors. Without the pressure of competition this also stops any innovation, improvement of the services or achieving more competitive prices.

As soon as any moves are made towards an increase in competition, innovation or affordability, the telcos will sue, or put an end to any such activities through co-opted whole-state legislatures. They are greatly supported here by the media. The telcos have essentially paid off the major media through their advertising purchases. Any analyses of telcos’ plans in the mainstream media are devoid of any criticism—‘we won’t say bad things about you and you’ll give us ad revenues’.

Furthermore, the massive consolidation of the original Bell companies did not just mean that they got larger; they also acquired a lot more money to develop a national lobbying plan, using the combined resources of 10-12 very large companies.

Back to the wireless broadband plan…

The main aim of the wireless broadband plan in the new stimulus package seems to be the public safety network.

According to one of my other American colleagues Fred R. Goldstein, the principal of Ionary Consulting, the plan includes reallocating the D Block for public safety (costing US$3 billion) and US$7 billion to support the deployment of this network, along with technological development to tailor the network to meet public safety requirements. This is part of a broader deficit-reducing wireless initiative that would free up public and private spectrum and enable the private sector to deploy high-speed wireless services to at least 98% of Americans, even those living in remote rural and farming communities. In addition, freeing up spectrum from the private sector through voluntary incentive auctions would raise money to pay for these investments in public safety and also reduce the deficit.

The concern here is that the Administration seems to have sided with the monopolists, AT&T and Verizon, against competition. Verizon has already said that it will cover 97% of the population with its mobile network, and small players have a bit more, so there’s nothing the government needs to do to reach the goal in the above political paragraph.

Just to recap, the Lower 700 MHz band includes the public safety broadband block (PSB) and the adjacent D Block. The original 2006-2007 plan, sponsored by Frontline Wireless, was to operationally combine the two. The operator (only Frontline was really a contender) would run the network for the public safety agencies and simultaneously provide wholesale commercial service to MVNOs. The commercial share of capacity would be capped in normal circumstances at around half, but in emergencies it would be lowered to around a quarter, giving PSB users more access. This would have worked. The focus was not on commercial designs, but on giving PSB users what they needed, which is more reliability under certain failure modes.

The FCC then wanted to auction off the D block, expecting Frontline to bid real money for it. The terms, however, were unbalanced—requiring Frontline to pay for the licence up-front and to then negotiate with the PSB licensee, the Public Safety Spectrum Trust (PSST).

The PSST had no downside risk if the negotiations failed, while Frontline would lose its money. Frontline could not accept these and other terms, so it withdrew at the last minute—hence no D block licence.

The FCC Opened for Comments in 2008 after that auction failure, and got the predictable responses. T-Mobile and other small carriers wanted the D block to be auctioned without letting Verizon and AT&T buy it. However, the incumbents wanted to give the entire spectrum to Public Safety, or to let them buy it and run it; but they did not want the FCC to reserve it for small players or newcomers like Frontline.

Since then the FCC has given advance licences to some public safety agencies (states, cities) to start building their own LTE networks for public safety broadband. So what the Administration’s latest plan seems to do is cancel the whole D block concept and simply expand the PSB to include the D block, so the public safety agencies will have a heap of reserved spectrum, and no newcomers will be allowed this ‘beachfront’ (good for longer ranges) spectrum.

Verizon and AT&T end up with a duopoly on below-1000-MHz spectrum. Also the Administration will provide the duopoly with US $7 billion to help the public safety agencies build these networks.

Then the Administration hopes that TV stations will give up their broadcast channels and the TV band can be repacked again (it was repacked just two years ago for the DTV transition). This will be a battle in itself but if it eventuates it will allow some more channels to be auctioned, so AT&T and Verizon can buy them up and keep anyone else from competing.

Also repacking of TV spectrum will reduce the amount of available White Space, only a few months ago the FCC agreed to make this spectrum available to unlicensed users. As a result of the new policy  the White Space option will become much less common and  will mostly only  be limited to rural areas where the spectrum is less crowded.

By Paul Budde, Managing Director of Paul Budde Communication

Paul is also a contributor of the Paul Budde Communication blog located here.

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