I believe the Federal Communications Commission should keep the spectrum cap in place.
The agency last week decided to review whether the spectrum cap-which prohibits any carrier from owning more than 45 megahertz of spectrum in any urban market-is still needed. While there may be room to relax waiver requirements, wholesale elimination is too drastic a step right now.
Large wireless carriers have been begging the commission to relax the cap for a few years, and indeed, rules have been relaxed in rural areas (where frankly, it has not made much of an impact.)
The cap is needed to foster competition between carriers. If the cap is eliminated, that competition will lead to consolidation quickly.
The commission only need look to the sweeping Telecommunications Act of 1996 to study how U.S. communications companies respond to any relaxation of the rules. The telecom act was designed to spur competition between local telephony, long-distance and cable TV operators by allowing them into each others’ markets. However, the act only served to consolidate the markets.
The Cellular Telecommunications & Internet Association favors eliminating the cap, arguing it would provide relief from today’s spectrum shortage.
In its release applauding the government’s plan to review the spectrum cap, CTIA noted the cap was put in place to foster competition, and that the wireless industry is one of the most competitive industries today.
The association is right. Multiple companies operate in each market precisely because of spectrum-cap rules. Why wouldn’t carriers consolidate further if they were allowed to do so? It would help every carrier’s bottom line to have less competition, whether a company is bought and gains an immediate cash infusion or whether a company acquires, and thus eliminates, a competitor.
It’s simply too soon to allow such consolidation. Two carriers dominated the market until 1995, when PCS services were initially launched. Even then, PCS carriers probably only gained a real presence in the wireless industry around 1997.
If the cap is relaxed, it will only be a very short matter of time before there are only two or three carriers offering wireless service. Even as it stands today, a handful of carriers control the market. Luckily, the spectrum cap forces competition to continue because those carriers must compete with each other in the most populated markets.
If the cap is lifted, it will only be a matter of time before there are once again two fat and happy carriers controlling the market. Only this time, there also will only be two fat and happy carriers controlling the industry.
