Communications Daily ($) cited my recent post comparing Google’s limited objectives for the 700 MHz auction with the expansive objectives it outlined to the Federal Communications Commission last summer, and it included the following reaction to my comments from Richard Whitt of Google:

Whitt said in response that Haney had misread his company's comments from last summer. “We consistently have argued that the open access license conditions adopted by the FCC would inject much-needed competition into the wireless apps and handset sectors, but would not by themselves lead to new wireless networks,” he said Monday. “Only if the commission had adopted the interconnection and resale license conditions we also had suggested -- which the agency ultimately did not do -- would we have seen the potential for new facilities-based competition.”

Another way to look at this is if there wasn’t any potential for new facilities-based wireless competition without the interconnection and resale license conditions Google wanted, why would Google have submitted bids for the spectrum which it might have won and had to pay for?

I do agree that prior to the FCC's adoption of two of the four open platform principles Google proposed the company consistently premised its commitment to participate in the auction on the FCC adopting all four principles. I also agree Google was clear that it believed all four principles were necessary to promote competition.

Then it participated in the auction anyway.

This case may reveal how some regulators and some legislators are shrewd, have their own ideas about how to get what they want and even think they know what’s in the best interest of corporations like Google.

It makes sense, as Whitt told Communications Daily, that the interconnection and resale license conditions would seem necessary to a hypothetical competitor who is a network provider. But in its Jul. 9th letter (and in the statement to Communications Daily) Google characterizes all four principles as being relevant to whether a new entrant would bid for the spectrum. For example:

Should the Commission not adopt the four open platforms requirements listed above, we believe it is doubtful that even the most determined and committed new entrant will be able to outbid an equally determined and committed incumbent wireless carrier, or consequently pave the way for second order competition.

Google was presenting an all-or-nothing-offer. But in Washington all-or-nothing-deals are rare. Google must have known this. Google got half of what it asked for (the typical return on investment here). And half a loaf seemed to be enough in view of the fact Google participated in the auction.

If in its prior conduct Google was saying only that it intended to ensure that the reserve price was met but it had no interest in owning the spectrum itself, that wasn’t particularly clear.

Reasonable people might differ, but I think if Google never intended to win the spectrum (unless there was no way around it), and it was merely advancing its hypothesis that the four open platform conditions would summon forth hypothetical new entrants that wasn’t especially clear at the time, either. Nor would it have seemed convincing to many people. Google’s proposal wouldn’t have acquired much momentum. The excitement was around the possibility Google would become the competitor. Google’s previous Jul. 9th letter to the FCC said “Google remains keenly interested in participating in the auction” and its subsequent behavior continued to highlight that interest.

Posted by Hance Haney at 3:21 PM | Permalink | Comments (0) | TrackBacks (0)

In 1993 Congress substituted auctions for the deplorable practice of giving away valuable spectrum to well-connected commercial entities.

Lawmakers who think spectrum is a valuable public resource for which the taxpayers should be compensated need to wake up for a minute. FCC rulemaking could render the remaining assets worthless, distort wireless competition and contribute to the unfortunate perception of the FCC as a candy store.

Google has made it clear that it plans to weigh in at the FCC as it determines how to re-auction the D-block from the recent 700 MHz auction, and that it wants to open the white spaces between channels 2 and 51 on the TV dial for unlicensed broadband services.

Anna-Maria Kovacs, a regulatory analyst, reported that in the recent 700 MHz auction AT&T Mobility paid an average price of $3.15 per POP in the B-block while Verizon Wireless paid 77 cents per POP in the C-block which was subject to special rules advocated by Google.

Now comes an admission that Google’s main goal was not to win C-block licenses in the auction but to jack up the price just enough so the reserve could be met, according to the New York Times.

“Our primary goal was to trigger the openness conditions,” said Richard Whitt, Google’s Washington telecommunications and media counsel.

Chairman Martin has articulated the critical issues at stake in this proceeding:

The most important step we can take to provide affordable broadband to all Americans is to facilitate the deployment of a third “pipe” into the home. We need a real third broadband competitor….The upcoming auction presents the single most important opportunity for us to achieve this goal. Depending on how we structure the upcoming auction, we will either enable the emergence of a third broadband pipe – one that would be available to rural as well as urban American – or we will miss our biggest opportunity. Such a status quo outcome certainly would not sit well with consumer groups that have been strongly urging us to adopt rules that facilitate the ability of a “third pipe” to develop.

Further, Chairman Martin has observed that Google and other members of the Coalition for 4G in America are “the only parties that have promised to try to provide a national, wireless broadband alternative.”

As Chairman Martin recognizes, the actual method of providing a broadband alternative is through a “real third broadband competitor.” This means that the would-be new entrants should not be aligned with either an incumbent wireline carrier or incumbent wireless carrier. Those carriers, quite rationally, seek to extend and protect their legacy business models, and in particular not take any actions that would jeopardize existing and future revenue streams. For this reason, the appropriate public policy stance is not simply to facilitate an additional spectrum-based broadband platform, but rather to facilitate independent broadband platforms.

Obviously, the idea that an open access requirement would facilitate a third “pipe” was naïve on the part of pliant regulators.

We now have a block of spectrum owned by an incumbent with an open access requirement which aligns nicely with Google’s business model. Yet it’s fairly obvious that the open access requirement contributed to a substantial loss for the Treasury.

The admission by Google’s counsel that winning the spectrum wasn’t the company’s goal and that Google submitted bids for the purpose of spiking the auction price casts doubt on the company’s motivation and veracity in view of Google’s previous representations to the FCC.

It may be that "everyone" attempts to "influence" the regulatory process when they can get away with it, but that doesn't make it right.

Posted by Hance Haney at 3:16 PM | Permalink | Comments (0) | TrackBacks (0)

I enjoy Walt Mossberg's Wall Street Journal personal technology reviews as much as the next person, but his latest jeremiad against U.S. mobile phone companies is way off the mark. Mossberg calls the mobile carriers "Soviet ministries" because they offer two-year service contracts, lock their phones during this contract period, and generally take a "walled garden" approach to content.

But the facts of the U.S. wireless industry are striking:

-- Ours is the most competitive wireless market in the world, with the top two players accounting for just 51.5% of subscribers. Some of us wouldn't mind if our market were more concentrated.

-- Prices have fallen some 85% since 1994, from around $.46 per minute to $.07 per minute.

-- Average minutes of use in the U.S. far exceed any other nation -- by a factor or 2x or 3x -- including the supposedly mobile-obsessed Europeans and Asians. U.S. average usage is 834 minutes per month. Europe, just 153. Our prices are much lower.

-- After lagging for a decade, the U.S. has deployed fast 3G networks ahead of the Europeans (although after the world-leading Koreans).

-- We can choose among some 700 mobile devices in the U.S., far more than any other nation.

-- Mossberg compares today's wireless landscape to the klunky-black-phone monopoly days of the 1960s where Ma Bell essentially owned your phone and did not allow other models. Do you really believe that, Walt?

-- Mobile carriers "lock" their phones because they also subsidize those phones. There's a trade-off. Consumers can choose to sign a two-year service contract in return for an inexpensive, subsidized phone. Or they can buy a phone full price, get it unlocked, and potentially take it to another carrier.

-- Apple's iPhone proves that innovation is alive and well and that partnerships -- like the Apple-AT&T deal -- work. It's the first device that brings the real open Internet to life on a mobile device. From here on, other carriers will have to give consumers the full-featured Net, too.

Mossberg should remember another thing: Wireless is hard. If you really think about it, mobile communications seems almost miraculous. It takes huge expense, planning, and engineering to make a wireless network function robustly. Wireless is a bandwidth constrained environment, where operators must tweak their networks to get every last bit-per-second-per-hertz out of their spectrum and equipment and to maximize geographic coverage with limited capital and operational expenditures. Likewise, mobile devices are small computers, which at least for now are limited in storage, MIPs, and battery power. We are improving these metrics at a furious pace, but we still must choose which applications and features to pack into these tiny packages. Any high-end technology starts as an integrated system -- all the components and interfaces must be optimized to even get the system to work. As technology matures, systems can break apart and modularize, and more third-party and plug-in components and applications become technically and economically viable. This will happen in wireless, too, but technology and economics must drive the process.

It's easy to assume wireless signals magically suffuse the ether and that I should just be able to stick any device into the air and get free phone calls and Web access. It's much harder to actually make it happen. No "Soviet ministry" ever engineered anything close to the wonderous wireless webs we all enjoy everyday.

-Bret Swanson

Posted by Bret Swanson at 10:09 AM | Permalink | Comments (0) | TrackBacks (0)