Senate State of Wireless Communications Hearing
The Senate Subcommittee on Communications, Technology, and the Internet is beginning its hearing on the State of Wireless Communications shortly, and I’ll be live-blogging it here. The subject matter is quite expansive, covering everything from rural wireless to unlicensed to the spectrum auctions, and including device interoperability, competition, the spectrum crunch and all the cool things we can do with smart phones.
The scope is so large that it would take several days to cover the material effectively, but they’ll do it all in an hour or two.
Clearly, the auction will be among the most important issues as it’s currently being formed. But I expect we’re going to hear about the larger trends in terms of faster and more pervasive networks using both licensed and unlicensed spectrum, and probably an inordinate emphasis on rural mobile networks, this being the Senate and all.
First up is Steve Largent of CTIA and formerly of U. S. Congress and the Seattle Seahawks. Largent has a good story to tell as the facts are on his side. He’s stressing the investment in mobile networks, the resulting innovation in applications and advanced 4G/LTE networks. But the explosion of LTE creates strain for more spectrum as more people do more things and do more of the old things. Naturally, there are economic benefits of better mobile networks and apps are clear. Largent emphasizes the value of licensed spectrum, which is appropriate as licensed is more efficiently used and will continue to be the building block of mobile for the near future. Largent closes by emphasizing the revenue that can be raised by auctioning as much spectrum as possible.
Steve Berry of CCA, the small carriers’ lobby, is next up. He’s got a tough row to hoe as Largent has made the case that the U. S. leads the world in 4G/LTE, something we found in our ITIF report on global broadband, The Whole Picture: Where America’s Broadband Networks Really Stand. So he’s talking about “beachfront spectrum,” something that doesn’t really exist, and the concentration of market share between Verizon and AT&T. He wants to limit the big guys’ spectrum auction participation by adjusting spectrum screens. The devil’s in the details on that plan, but I suspect it will probably carry the day in some form. We’re still going to end up with several carriers having either too much or too little of the low frequencies to meet their needs, so secondary market transactions – spectrum swaps – are going to be necessary.
Cisco’s Doug Webster is next. He touts the Cisco VNI, the survey of network usage that’s has historically tended to slightly underestimate increasing demand for bandwidth, both wired and wireless. Cisco is not in the mobile business, so they’re an honest broker in forecasting mobile spectrum utilization. Webster emphasizes the economic benefits of mobile, a theme that Largent raised.
Comcast’s Thomas Nagel is boosting his company’s Wi-Fi network and seeking more unlicensed spectrum in the 5 GHz band. This should be uncontroversial, except that the smart roads people want the 5.9 GHz spectrum for their application. Resolving the demand for more spectrum in multi-purpose networks like Wi-Fi and single purpose networks is one of the hard problems that Congress and the FCC need to address. The hearing memo mentions this briefly, but it needs more attention. Nagel wisely points out that the PCAST sharing recommendations make the most sense in the 5 GHz band. Let the experiment begin on spectrum that has no particular role in cellular networks.
George Ford from Phoenix is up next, speaking on the spectrum crunch from the economist’s perspective. Ford would like to know how the mobile carriers can get twice as much spectrum as they have today. Secondary market transactions allow existing inventory to be reallocated most efficiently but don’t increase the overall size of the pie. The burning question is how we pry spectrum out of the hands of the government agencies – chiefly the DoD – who don’t use it very sensibly today. Are we going to use spectrum auctions or are we going to use administrative assignment to spread spectrum around? Ford suggests that a small number of networks yields more efficient use, which is true as a matter of engineering even if it has side-effects that lawmakers aren’t going to like. As you’d expect, the lone economist on the panel ends with the revenue question: low encumbrances on bidding yield more revenue.
Now we have Consumer’s Union’s Delara Derakhshani. She discusses bill shock and cramming, which aren’t really spectrum issues even if they are consumer issues. Same goes for cell phone unlocking, but it’s in the hearing memo so you can’t blame her. She’s not letting any of the technical issues get in the way of her objectives, and that’s fine: the role of consumer advocates is to seek lower prices and more free stuff, and it’s the role of others to show what the price tag is for the things they seek. Interoperable cell phones cost more than those that are tuned to particular networks and don’t work as well. Where’s the consumer benefit in that?
Now we’re in the questions.
Chairman Pryor seems surprised to hear that Wi-Fi can be congested. Gosh. Aha, he mentions the car nets, very astutely. So what can we do about sharing 5.9 GHz between cars and Wi-Fi? Nagel doesn’t get the efficiency issues with Wi-Fi, which is understandable given that Comcast doesn’t have anything going on with licensed spectrum. He wants wider channels, and don’t we all?
Sen. Thune has entered the room, and will make this opening statement. He mentions licenses in different sizes so the little guys can get rural spectrum, quite sensible. He asks Ford about auction participation. Ford says we have to look at the effect of auctions on end users. When an efficient – because of large scale – network gets more spectrum, it can pass cost savings on to a larger pool of users. That’s a good answer.
Sen. Klobuchar is on the unlocking issue, which is largely moot as carriers will already unlock most phones when the contract is paid off, but the folks on that issue are saluting the flag. Largent says 600 different phone are for sale in the U. S. already, including unlocking ones, so it’s not really that much of an issue. CTIA obviously doesn’t want consumers taking subsidized phones to other networks. Klobuchar refers to other countries, but not at the level of specifics. Small carriers can’t get iPhones or Samsung Galaxy S4’s, of course, but that’s a design and marketing choice that Apple and Samsung are making so it’s not clear what the Congress can or should do about it. Derakhshani doesn’t seem to understand who designs and builds smart phones. I don’t think we’re going to hear much more about unlocking today, but that might be wishful thinking.
There was some funny banter about Largent and Halls of Fame. Ha. Sen. Heller wants an unencumbered auction, and so does the quarterback. One perspective on auctions sees them as inputs to the secondary markets. Berry says that auctions that deal with small licenses raise more money than those that deal in large ones; more bidders for the same pie. It’s hard to make apples-t0-samsungs comparisons in this area, as all spectrum markets are not equal.
Sen. Warner is in the wireless hall of fame, and he also has an NFL connection. That seems to be a theme today. He was in the wireless industry 30 years ago, well before I was (1990 for me, Wi-Fi creation time.) Warner wants a spectrum inventory, an idea that’s been floated quite a lot but never done because it’s extremely expensive. The FCC has most of the info that an inventory would yield, or could get it by survey should the need arise.
Largent simply wants more spectrum on the market, for both large and small license holders. He draws the “beachfront line” at 3 GHz, the smartest thing anyone has said all day. Warner raises interoperability in passing, and immediately drops it.
Sen. Fischer asks an intriguing question: “Is mobile service a right?” Cisco’s Webster says it’s really cool, but doesn’t answer the “right” question. Ford says a monopoly would pay more for licenses than anyone else. That’s true, but scary. If Congress demands interoperability, Ford says it will distort the market. He doesn’t address the rights question either, and Berry is the next to punt it. The underlying issue is how you get service to rural areas without an interoperability mandate, but the real question is a roaming mandate. Europe has a roaming mandate, but it has extremely bad mobile networks regardless. Largent points out that 90% of America is covered by LTE already, and before long it will reach today’s 3G coverage level, 98%. The government has 70% of the sub-3 GHz spectrum today, so Largent wants to free it up. Berry mentions the TV broadcasters, the other large spectrum squatter who needs to be kicked of most of its spectrum.
Webster raises the most salient point in the spectrum crunch: Washington has no sense of urgency to solve the problem today. It’s really, really critical to act fast as it takes so much time to re-purpose spectrum. Nagel talks about sharing, but there are technical issues with sharing that need a new innovation. Ford wants to get markets involved in spectrum management. Derakhshani wants magic solutions, of course. Don’t we all?
Sen. Nelson wants to know about efficiency. Largent points out that we’re fast approaching the limits of efficiency. Everyone else tells him that the failure to free up spectrum will produce pain.
Chairman Pryor seems to be asking about small cells, which are much more expensive that most advocates realize. Sen. Rubio asks about transfers and revenues, and Ford lays out the issues and generally praises the FCC’s recent actions on secondary markets. Berry doesn’t like secondary markets, or even primary markets as far as I can tell. A lot of his small carriers are struggling to remain viable as the cellular market becomes the mobile broadband market; they just don’t have the scale to be successful. He wants to pair 1755, a wise move.
Sen. Rubio asks what happens if we don’t free up federal spectrum; Webster says “bad things.”
Sen. Blumenthal goes “beachfront” per the DoJ analysis. Boo. The answer is to go hyper-regulatory, not really a good thing. He’s convinced that text messaging rates are rising, which simply isn’t true; somebody should tell him about this thing called “Twitter.”
Back to Klobuchar, who keeps her daughter on a metered text messaging plan and pays heavily for the privilege. How can federal agencies be made to share spectrum? The panel agrees that it’s good to let commercial carriers pay for equipment to relocate federal users, but the issue that nobody mentions is security clearances around DoD systems that are especially out of date. She also has the typical rural state concerns about NG911.
Sen. Ayotte is not a fan of the universal service fund, CAF, and the mobility fund. The problem is wireless-only consumers are paying for wired service for others. This is really not right, is it?
The chairman asks about cramming, and that’s a wrap. Thank you for coming.
A bit harsh. But I’ll spare everyone and take it up with you in person over coffee.