WASHINGTON-The Federal Communications Commission is wading through competing comments and competing economic studies as it decides whether to eliminate the cap that limits the amount of spectrum a company can control in a market, leave it in place or raise the cap to 70 megahertz.
The current cap limits the amount of spectrum to 45 megahertz in urban areas and 55 megahertz in rural areas. The FCC is also examining whether to eliminate the cellular duopoly rule restricting cellular licensees to only one license per market.
The FCC will be forced to pick winners and losers as it wades in these waters. For example, Verizon Wireless, the nation’s largest wireless carrier, said the FCC needs to justify keeping the rules. The Office of Advocacy in the Small Business Administration said the FCC has to justify removing them.
“This report makes it clear: At the end of the day, the spectrum cap harms American consumers and the U.S. economy. … I encourage the FCC to take concrete steps to move ahead, and to let the fierce competitors in the wireless marketplace do our work,” said Denny Strigl, Verizon Wireless chief executive officer.
Verizon filed a study by Robert H. Gertner, professor of economics and strategy at the Graduate School of Business of the University of Chicago and senior vice president of Lexecon Inc., and Allan L. Shampine, an economist at Lexecon Inc., a law and economics firm in Chicago.
“The [FCC] does not clearly state its regulatory goals in this proceeding. … The [FCC] explores whether it should alter the [commercial mobile radio service] spectrum cap and cellular cross-ownership restrictions. The [FCC] indicates that the Communications Act requires it to eliminate or modify any rules that it determines are no longer in the public interest. However, the [FCC] does not indicate that it believes the spectrum cap and cross-ownership restrictions no longer serve the public interest, and does not clearly explain why it believes a revision of these policies might be necessary,” said Susan M. Walthall, SBA acting chief counsel of advocacy, and R. Bradley Koerner, SBA assistant chief counsel for telecommunications.
While the Cellular Telecommunications & Internet Association has led the charge to lift the cap, its members are not all united.
“It is instructive to remember that cellular carriers opposed the [spectrum cap] proposal at the time, because of their claim that a cap would negatively limit the additional spectrum that they could obtain within their existing markets. … The position of the incumbent industry was not unanimous. Sprint Corp., which then held cellular properties, agreed that the FCC’s concerns may be well founded. Given the limited amount of spectrum it is clear that if a provider can acquire all of the available spectrum in a particular market then that provider can stifle competition,”‘ said Sprint PCS.
Sprint said the cap should be modified to allow cellular licensees to gain access to spectrum to replace spectrum that they must set aside for analog use. Currently, cellular licensees are required to dedicate a portion of their spectrum for their analog customers. The FCC expects to release a wide-ranging notice of proposed rule-making on the cellular analog technical rules, including the analog set aside, within the next month.
Sprint’s proposal also would allow the cap to be loosened for carriers offering third-generation wireless services and would sunset after carriers had won 3G spectrum at auction. Sprint filed a study by John B. Hayes, principal in the consulting firm of Charles River Associates Inc.
Smaller carriers, which gained access to 10 additional megahertz the last time the FCC examined the cap, called for its elimination across the board.
The Rural Telecommunications Group and the Organization for the Promotion and Advancement of Small Telecommunications Companies “wholeheartedly support the [FCC’s] attempt to remold the spectrum cap and cellular cross-interest rules. These rules, while well-meaning, are now obsolete and counter-productive in the current competitive marketplace for mobile communications services … these rules so constrain carriers that they have had a negative impact on the growth of competition in rural and underserved markets and in the rollout of new technologies in these markets,” said RTG/OPASTCO.
CTIA President Thomas Wheeler has said the cap should be eliminated and the Department of Justice should examine market concentration considerations.
“First we have to recognize that the cap might have made sense in an auction environment to make sure that no one carrier walked off with all of the spectrum. But now seven years later, it only serves to inhibit competition and inhibit spectrum from being used in the most efficient manner. The mistake with the spectrum cap is that it is a bright line. You can’t get to the question you asked because the government has ordained it will be 45 megahertz. Period. You can never get to the question of what is effective competition in this or that market. When you get rid of the cap you can begin to address that question,” said Wheeler.
CTIA filed a study by Professor Marius Schwartz of Georgetown University and John M. Gale of the Brattle Group.
BellSouth Corp., now part of the Cingular Wireless Inc. partnership with SBC Communications Inc., has been one of the most vociferous opponents of the cap-taking one iteration of it to the federal appeals court and losing.
The nation’s largest wireless reseller, WorldCom Inc., urged the cap to be retained.
