Spectrum: Where It Came From, Where It Goes

Dark Side of the Moon album cover

In the the beginning, wireless spectrum in the U.S. was free. In  1983, the Federal Communications Commission created the first analog cellular networks by assigning two chunks of airwaves in the 800 MHz band. One chunk was reserved for the incumbent local wireline carrier, or Baby Bell as they were then known. This ancient history is important because the leg up that was given to the companies that gradually coalesced into Verizon Wireless and AT&T formed the basis for these carriers’ domination of the U.S. market. The story of spectrum over the past three decades is mostly a tale of the rich getting richer, all the while bemoaning their poverty.

Over time, the government assigned more and more spectrum to wireless voice and (eventually) data. New competitors did arise. Sprint, until then primarily a wireline long-distance operator, created its network out of the 1994 auction of 1900 MHz “personal communications services” spectrum. Wireless phone pioneer Craig McCaw built the Nextel network out of bits and pieces of “special mobile radio” licenses intended for dispatch services. T-Mobile and its predecessors assembled a bunch of smaller carriers using the GSM standard, which was then widely used everywhere but the U.S.

But through auctions and acquisitions, the biggest carriers managed to get even bigger. The last major wireless spectrum auction was the 2007 sale of television bandwidth that had been freed by completion of the transition to digital TV broadcasting. To the surprise of just about no one, the overwhelming winners in the sales  were Verizon and AT&T, which have been using the spectrum in the 700 MHz band to build out their fourth-generation LTE networks.

The problem we now face is that after 30 years of freeing bandwidth for mobile data use, we’ve pretty much run out of spectrum that can be reassigned without a major fight. The only sale on the horizon is an additional 100 MHz of TV bandwidth. But among many other complexities, availability of this spectrum will require some stations to give up their licenses (in exchange for a share of the proceeds from the auction) and others to move to new frequencies to create usable blocks of contiguous spectrum. The convoluted process mandated by Congress means that the sales won;t begin until 2014 (at the earliest) and are likely to yield a good bit less than 100 MHz in many parts of the country.The problem we now face is that after 30 years of freeing bandwidth for mobile data use, we’ve pretty much run out of spectrum that can be reassigned without a major fight.

In the absence of new allocations coming down the pike, Verizon and AT&T have been bulking up on spectrum through mergers and acquisitions. AT&T failed to convince Justice Dept. anti-trusters that its need for spectrum justified its proposed 2011 acquisition of T-Mobile. It announced on Jan. 22 that it intends to acquire the remainder of regional carrier Alltel, the bulk of which was bought by Verizon in 2008. Verizon is buying the spectrum of a consortium of cable companies, which once had dreams of building their own wireless networks.

The incumbent wireless carriers insist that the system is header for crisis without additional bandwidth and the the best, and perhaps only, way to get it is by selling them the rights to spectrum currently held by others. In a post on a the AT&T public policy blog, Joan Marsh, vice-president, federal regulatory, responded to a recommendation that sharing spectrum with federal agencies might be a good way to increase capacity, saying:

The Report [of the President’s Council of Advisors on Science & Technology] found that the new norm for spectrum use should be sharing, not exclusive licensing.  While we agree that sharing paradigms should be explored as another option for spectrum management, sharing technologies have been long promised but remain largely unproven.  The over-eager pursuit of unlicensed sharing models cannot turn a blind eye on the model proven to deliver investment, innovation, and jobs–exclusive licensing.  Industry and government alike must continue with the hard work of clearing and licensing under-utilized government spectrum where feasible.

John Marinho, vice-president of technology and cyber security for CTIA-The Wireless Association, which speaks for the wireless incumbents, wrote:

Trust me, the carriers are deploying and using every single technology and “trick” they can to try to solve the looming spectrum crisis in the near-term, but nothing will solve the problem like more spectrum. Claude Shannon proved that there are practical limits to how much bandwidth capacity is available from a limited amount of spectrum. One has to look no further than the father of information theory to realize that the solution is more spectrum.

I’ll have more to say about Shannon’s laws and its implications for wireless networks in future installments, but the truth is that there are lots of techniques for expanding the capacity of wireless networks that have yet to be deployed in any serious way. Martin Cooper, who built the first cellphone for Motorola before there was a network to use it on, says: “I can tell you that the way not to create more spectrum is to redistribute it. And that is what the government is proposing to do now, take it away from some people and give it to others. That’s not going to do it.”

The next articles in this series will explore some better ways.


LightSquared, Spectrum, and the Dilemma of Competition

Lightsquared logoLightSquared, the company that wanted to turn satellite communications spectrum into a wholesale land-based wireless broadband network has hit the end of the regulatory road. The National Telecommunications & Information Agency is convinced that Lightsquared’s technology cannot avoid interfering with an adjacent band used for GPS signals. And the Federal Communications Commission is about to withdraw LightSquared’s provisional permission to operate the network.

Sascha Segan at PCMag.com has an excellent take on how muddled federal spectrum policy contributed mightily to the LightSquared fiasco. But the article also runs into a contradiction between two goals of sensible spectrum policy: fostering competition and insuring that the winning bidders in spectrum auctions have the wherewithal to build out their networks:

“That’s going to require facing up to a lot of entrenched interests. It’s going to require making hard decisions about which existing technologies are more and less important than wireless broadband, and it’s going to require hiving off a lot of new spectrum for new entrants. It may also require putting stricter buildout rules on spectrum auctions, so we don’t get situations like we’re seeing with Clearwire, where companies sit on massive banks of unused spectrum because they can’t afford to build networks.”

The problem is that building out a wireless network requires a ton of capital investment. Strict buildout requirements would seem to mean that bidders must in some way certify that they have the financial means to build out the spectrum  they want to buy. But those requirements might just work to the benefit of well capitalized incumbents.

History is not encouraging on this point. In the late 90s and early 00s, Congress required the FCC to set a side a share of spectrum auctions for small and minority-owned businesses. As the Congressional Budget Office found in a study of these auctions:

“This analysis shows that the preferences adopted by the  FCC in the PCS auctions, particularly those used in the  auction for the first large block of spectrum set aside for small businesses, the C block, did not ultimately result in widespread or long-term participation by small businesses in the PCS market. As of 2005, it was a common occurrence that control of a large portion of the PCS spectrum authorized by licenses set aside for small businesses had been sold to large providers; thus, many of the expected benefits of small-business participation were not realized.”

In other words, the auction winners never built networks and instead sold their spectrum to incumbent carriers. Some undoubtedly planned to “flip” their winnings from the beginning (and some of these were undoubtedly little more than fronts for the incumbents from the get-go.) Others actually tried to build networks, but failed to raise the necessary capital.

Then there was the sorry case of NextWave, another would-be competitive entrant. In 1996, with won a spectrum auctions for $4.7 billion, but filed for bankruptcy after making the initial, minimum 10% payment. The government tried to get the spectrum back. Ten years of litigation ensued and the bandwidth ended up being sold to, you guessed it, Verizon Wireless, Cingular (now AT&T), and MetroPCS.

And if more examples are needed, there’s the long, sad ClearWire story. ClearWire had a stellar group of investors, including Intel, Motorola, Sprint, Comcast, and Time Warner Cable. It also had 100 MHz of nationwide 2.5 gigahertz spectrum. But it made a bad technology bet–WiMAX rather than LTE 4G–and foundered before it could build very much of the planned national network. That huge block of spectrum is now sitting mostly unused while Sprint, which ended up the majority owner, tries to figure out how to salvage the wreckage.

There is, alas, no easy solution to the tension between increasing competition and assuring buildout. For a brief time, it looked like Google could become a rich new entrant when I said it planned to bid in a 2008 auction of 700 MHz repurposed television spectrum. Google succeeded in getting the FCC to adopt network neutrality ruled for a big block of the spectrum, but it apparently was never a serious bidder. It bowed out of the auction as soon as the bidding hit the reserve price and the bandwidth was eventually bought by Verizon, which is using it to deploy LTE service. With the withdrawal of cable companies from the wireless game (they too are selling their spectrum to Verizon), we are running out of well-heeled new entrants to the business. And history has shown that it is a game that only the well-heeled can  play.