700MHz: Money Talks

Verizon and AT&T, now own the bulk of the frequencies in the 700-megahertz band, formerly used by UHF television stations.

Verizon and AT&T, now own the bulk of the frequencies in the 700-megahertz band, formerly used by UHF television stations. Signals at these frequencies penetrate buildings better than current cellular service, which operates at 850 and 1900 megahertz. KB Enterprises has maps of the winning bidders.

The FCC’s 700 MHz auction raised $19.6 billion for the U.S. Treasury with AT&T Wireless and Verizon Wireless accounting for the bulk ($16 billion). Google acquired no spectrumHere’s the FCC’s full list of 700 MHz winnersCommissioners Michael Copps and Jonathan Adelstein issued separate statements; (Copps and Adelstein).

Verizon’s C-Block coverage appears nearly total.

AT&T will cover 100 percent of the top 200 markets when their auction winnings are combined with their purchase of Aloha Partners’ 700 MHz spectrum. Combined with their AWS spectrum coverage, AT&T will now cover 95 percent of the U.S. population with new cellular licenses.

Qualcomm and Echostar bought up most of the 6 MHz that will likely be used for mobile television with Qualcomm picking up the California coast and NE, while Echostar covers most everything else. The auction failed to attract significant new competitors.

So it’s done.

What did consumers get out of it? Not much. When’s the last time your phone or cable bill went down? Meanwhile the cost of digital electronics and services is plummeting.

It also means that 700 MHz will use HSDPA/LTE not Mobile WiMAX. Will AT&T and Verizon wait until 2011 or 2012 for LTE? Probably not. That may not seem like a big deal by itself, but it DOES mean there will be a forklift upgrade to LTE. If it ever happens.

New LTE handsets and replacement LTE infrastructure will cost real money. Plan on paying twice as much ($50 vs $25) for half the speed (500 Kbps vrs 1 Mbps) using cellular’s dead-end, HSPA (3G) network. For a long time.

Like ATSC (the U.S. digital television standard), old school cellular operators on 700 MHz could also drag down more cost/effective [mobile WiMAX] options in Canada and Mexico, too.

Consumers got screwed. Here’s my argument:

  • Voice-centric, proprietary cellular networks are expensive. Data-centric networks [like WiMAX] are not.
  • Some operators [like Sprint], say Mobile WiMAX delivers a 10-1 cost advantage over cellular.
  • At 700 MHz, only one tenth the number of towers are required compared to 2.5 GHz.

That would indicate that a competitor (like Google) could come in and clean up. But they didn’t.

Here’s why:

As Susan Crawford puts it:

Verizon has won spectrum it arguably didn’t even need, given its existing spectrum holdings. It retains the discretion to act as a traditional cellphone-model company – picking and choosing among applications and devices, underselling “open” devices, and discriminating against traffic that undermines its business model.

Verizon and AT&T could afford to overpay. They’ll get taxpayer subsidies from USF and IWN to bolster their dominance. They could NOT afford to have Google come in and essentially provide “free” phone service — even if Google’s cost of doing business was 2-3 times higher. Incumbent wireless carriers come to the auction with a vast array of existing assets, as Google lawyer Richard Whitt, pointed out last year.

I agree with DSL Reports’ take on the 700 MHz auction:

Yes, here’s the part where we’re supposed to tell you that Google’s loss was actually a win, because Google forced the FCC to attach some barely enforceable Carter-fone “open access” conditions to the spectrum, resulting in a brave new world of wireless connectivity. Sorry, that’s nonsense.

In the years we’ve watched AT&T and Verizon at work, there’s not a law, condition, or requirement their lobbyists haven’t been able to wiggle around, through or over — given enough time and resources. To expect otherwise here is folly.

The most Google accomplished was to make a small ripple in the very large pond that AT&T and Verizon inhabit. While the auction’s biggest winner, Verizon, is taking baby steps toward “open access,” those steps are largely showmanship, over-stated by the media, and will come at a steep premium for consumers.

The primary focus will remain on promoting their traditional phone options, with “open access” connectivity offered begrudgingly as a luxury service (with a highly restrictive terms of service). It will remain business as usual.

I don’t blame Verizon or AT&T. They’re just trying to make a buck and need to protect their cash cow.

Congress and the FCC dropped the ball by not creating a more competitive environment. They could have created a USF funding model that encouraged competition. They could have avoided making the Integrated Wireless Network a $10 billion narrow-band boondoggle [that will probably never get built]. They could have encouraged “4G” technology, more competition, and lowered consumer costs with more effective use of the spectrum.

Congress and the FCC could have done more. But they were probably afraid of the dominate carriers — unlike the political leadership in AustraliaArgentinaCanadaMexicoEuropeSingaporeTaiwanPakistanRussiaIndiaJapanSouth Korea, and many other places around the globe.

The Universal Service Fund (wikipedia), is a $4 billion program that subsidizes telephone access in rural and poor areas. USF funds are provided to multiple carriers, both wired and wireless.

But members of a House committee said the five-year, $1.2 billion Universal Service Fund to provide rural communities with broadband was broken, reports the Washington Post. The Universal Service Fund missed many unserved areas while channeling hundreds of millions of dollars in subsidized loans to companies in places where service already exists, charged the committee.

“If you don’t fix this, I guarantee you this committee will,” House Agriculture Committee Chairman Collin C. Peterson (D-Minn.) told James M. Andrew, administrator of the Rural Utilities Service at the U.S. Department of Agriculture. “I don’t know why it should be this hard.”

The FCC’s AWS auction in September, 2006 (FCC summarygrossed $13.9 billion for the U.S. TreasuryT-Mobile USA, the No. 4 U.S. wireless provider, topped the bidding by offering almost $4.2 billion for 120 licenses.

While the Bush Administration promised to “bridge the digital divide” with 90 MHz of new spectrum, it was cellular operators that benefited.

The truth is the 700 MHz auction was rigged from the start.

The FCC carved up the spectrum for cellular operators. It used frequency pairs (FDD). But with FDD, one channel is always listening, wasting spectrum. Mobile WiMAX, with TDD, is widely believed to be more cost/effective and a better match for MIMO and beamforming. Why didn’t the FCC encourage TDD on the 700 MHz band? Perhaps it was money. Cellular money.

The wireless industry’s top lobbying group, CTIAspent nearly $6.9 million in 2007 to lobby on re-allocation of wireless airwaves for commercial use, and other issues, according to a disclosure form posted online Feb. 14 by the Senate’s public records office.

It also lobbied Congress, White House, Commerce Department, Homeland Security Department and other agencies on other wireless tax and security issues.

They did a pretty good job of helping themselves.

Luke Pensworth Written by: Luke Pensworth

Luke is the managing editor and site manager of Dailywireless. As a wireless enthusiast/consumer, he reviews a lot of services based on his own experience. Disgruntled as he may be, he tries to keep his articles as honest as possible.

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