One cannot overstate the sway that the federal government holds over the telecom industry. A wide variety of issues that could dictate the future of this sector are directly influenced by decisions made by government entities. For instance, as previously reported by RCR Wireless, the much speculated potential merger between Sprint and T-Mobile would require approval from both the U.S. Department of Justice and the Federal Communications Commission to move forward.
Angela Giancarlo, Government & Global Trade partner at Mayer Brown, recently spoke with Wells Fargo analysts about the various regulatory issues facing the telecom industry. With years of experience as a telecommunications lawyer and previous direct dealings with FCC officials, Giancarlo is uniquely qualified to discuss these matters and provide valuable insight.
Questions remains regarding spectrum auction
A major talking point during the conversation was how the next spectrum auction would play out. According to Giancarlo, many details remain unknown as government authorities have generally kept their cards close to their vest. It's still unclear even how much spectrum will be made available to wireless carriers. Giancarlo stated that the initial plan was to auction off 120 MHz, but that figure may now stand at 60 MHz.
Furthermore, the auction process itself remains shrouded in mystery. There is still some debate whether the FCC will employ a descending or ascending clock to structure the auction. If it chooses to go with a descending clock, carriers will have a limited amount of time to place their bids, which will then be considered before enacting ensuing auction rounds. On the other hand, an ascending clock would effectively eliminate any time limits, allowing participants to continue outbidding each other until a single carrier rises above the fray.
Without clear details regarding how the process would develop, Giancarlo relied on her inside sources and personal experience to speculate on various aspects of the auction. For example, she stated that spectrum will most likely be auctioned off in blocks of 5 MHz. She could not say for sure, however, whether or not the FCC would allow package bidding, which would allow participants to bid on specific chunks of spectrum. Such a practice would likely appeal to larger wireless carriers like Verizon and AT&T that want to fill out their existing assets.
Disseminating spectrum
Another major issue that has yet to be addressed is how spectrum will be dispensed across the nation. Giancarlo explained that obtaining additional spectrum presents far more appeal to major markets like New York, Los Angeles and Chicago than smaller cities and less populated regions. Those larger markets are faced with much more strained networks given the number of users draining available resources. Despite the need for more spectrum to be made available to major cities, Giancarlo said that broadcasters in small markets were more likely to participate in the auction.
Some government officials and telecom members want to create comprehensive, nationwide coverage, even if it comes at the expense of users in major cities. Giancarlo addressed the suggestion that network engineers create an algorithm that would disperse spectrum across the country regardless of its original location. If this proposed project were executed, spectrum from New York could theoretically be used to provide wireless service to rural communities in other parts of the United States. Giancarlo noted that it remains unclear how such a system would work or if it was even possible to achieve.
Giancarlo argued that the FCC could be doing more to raise awareness about the spectrum auction. As of now, government officials have made few strides reaching out to carriers and educating them on the benefits of participating. However, the FCC may have learned its lesson from previous missteps and may offer a more competitive auction process the next time around. Giancarlo stated that the recent H-Block auction presented a particularly egregious example of what can happen when the proper safeguards are not put in place. In that instance, Dish Network managed to buy up all 176 licenses that were made available by the FCC. Hopefully, the next auction fosters more competition and an even dispersal of spectrum.
