White Spaces and the CTIA Game Changer

The idea of auctioning the broadcast white spaces, rather than opening them for unlicensed use, is not new. It started out as an NAB “poison pill” back in 2005, when we looked like we might be making progress on getting a pro-white spaces amendment in the DTV transition bill that ultimately became the Digital Tranisition Act of 2005. When the FCC reinvigorated the proceeding in 2006, the NAB managed to get the FCC to put the question of licensed v. unlicensed in the Further Notice. But the NAB doesn’t want any neighbors, either licensed or unlicensed, and has focused its efforts until now on trying to kill the whole idea rather than on trying to promote licensing and auctions rather than unlicensed.

But the idea of licensing the white spaces for cellular or backhaul has gained new life recently, particularly after the 700 MHz auction. Both Verizon’s Steven Zipperstein and analyst Coleman Bazelon recommended this in their testimony at the House Telecom Subcommitte hearing on the 700 MHz auction. That comes on top of a serious filing by CTIA on the benefits of auctioning some of the white space and leaving a smidge so that unlicensed technologies can continue to develop.

We’ve now gone from NAB poison pill to serious issue. The proposal has not yet gained traction, but it does not do to underestimate CTIA and its members because, particularly after the 700 MHz auction, a number of its members really need that spectrum. This has the potential to change the game radically, including shifting alliances as the threat becomes more credible.

Analysis below….

As I rather whimsically observed recently, the wireless market has fundamentally changed in the last few years. From a market of five or so roughly equal national players and a significant number of regional players, the wireless industry has now come to resemble the wireline industry of 2000-01: the big incumbent telcos (ILECs) v. competing carriers (CLECs) and a bunch of rural providers surviving in the margins. And as the CLECs looked strong and competitive in 2000-01 if you looked at retail and ignored the infrastructure bottlenecks, so too the wireless carriers. And, like the CLECs, if they don’t solve the problem soon, they will either die or be reduced to niche players and fringe markets.

The problem for carriers is aggravated by the ever increasing emphasis on high-speed wireless broadband as the way to stay competitive, the issue of capacity — particularly for backhaul but als for roaming — has started to become urgent. In early April, Sprint delayed its premier of Xhom at the CTIA convention in Las Vegas due to problems getting enough backhaul capacity. Now throw in the 700 MHz auction, which essentially cemented Verizon and AT&T as top dogs in residential cellular. MetroPCS, Leap, Altell, and other second tier carriers trying to make the jump to genuine national provider or even increase capacity in existing markets got shut out. With no new spectrum auction on the horizon, these guys need to find more spectrum and white spaces looks like what’s available.

The Licensing Option Ramps Up

Movement for licensing rather than opening the white spaces to unlicensed died for the most part when NAB saw there was not much support for the idea and then got handed the gift that keeps on giving, the Microsoft protoypes. But movement around licensing and auction white spaces began to pick up slowly in the winter of ’07-’08 — and from a new industry segment: the wireless industry itself. First, a company called Fiber Tower and the Rural Carriers put in a white paper. Then in January, Sprint and T-Mobile (who were sitting out the 700 MHz auction for lack of funds) chimed in with their support. Google filed a brief counter argument, but there was not much other response.

For myself, I began to worry, and started to hammer on the tech folks to PAY ATTENTION and be ready to respond. As usual, the tech folks (with the exception of Google) responded by giving the public interest people a pat on the head and telling us not to fret ourselves (and they wonder why they keep getting spanked). I could see the changing dynamic in the wireless world made this a matter of real financial interest, not just some FUD to keep out WISP competitors (who barely show up on Sprint or T-Mobile’s radar) or an effort to pick up some low hanging fruit if it became available. But a lot still hinged on how the 700 MHz auction went.

Well, we now know the answer to that. And now my spidey-spectrum sense is definitely tingling. For those of you young ‘uns looking to learn how to read regulated industry spoor so you too can predict oncoming regulatory trends, here are the equivalent of bent twigs and herbivore droppings.

1) The official trade organization for the industry, after years of non-interest, suddenly files something significant;

2) An insider news reporter begins to notice;

3) Sock puppets start getting active on the issue for no good reason.

To this add the fact that not one, but two witnesses (Verizon and wireless analysts Coleman Bazelon) raised the matter at the 700 MHz auction hearing — the later as a “cure” for the concentration of licenses produced by the 700 MHz auction. Bazelon has fairly substantial credit in some circles, and he included in his testimony a plausible estimate for what a white spaces auction might fetch. (I think he is underestimating the associated costs and difficulties with integrating the white spaces into existing networks — especially in more crowded markets. But I’m not an economist.) To a cash strapped Congress, particularly with no new spectrum available, this will definitely prove appealing.

What Happens Now

It still remains to be seen how serious a play this will become. The forays by the wireless companies are still fairly tentative. The FCC action has been more probing and laying down markers than a concentrated attack/sales pitch. Similarly, the sock puppet show seems fairly muted so far.

Also tellingly, none of the Members of Congress at the 700 MHz hearing asked any questions about it. Mind you, there was a lot of other ground to cover. But if the wireless folks had pushed hard, I would have expected to see a “stimulated question or two.” So is this a genuine new initiative by CTIA and the wireless industry? Or is this more of a fishing expedition/testing of the waters — only to be used if there is low political cost and if the FCC turns down the unlicensed devices?

Either way, however, this has the potential to be a serious game changer.

For white spaces advocates: The urgency of getting rules passed quickly increases dramatically. CTIA will argue that if WSD supporters cannot demonstrate the viability of the technology, licensing represents the fastest way to put the white spaces to productive use. In particular, if OET cannot issue some kind of favorable report or recommendation, CTIA is positioned to swoop in and offer a reasonable alternative that puts spectrum into productive use, increases wireless competition, and generates revenue for the government. That’s hard to beat if the technology for white spaces is rated “not yet ready for prime time.”

For WSD opponents: Similarly, for WSD opponents, the option of stalling and keeping any use of white spaces from occurring is much less a realistic plan. CTIA members need that spectrum, and have developed a far more effective lobbying presence than they had back in 1996, when NAB first won the fight against the cellular industry over how to manage the transition to digital. And plenty of folks on the Hill would love to believe that white spaces could be yet another bonanza of billions without raising taxes and to the devil with all this crap about our wireless future.

But for white spaces opponents, choosing the lesser of two evils — unlicensed or licensed — may split the alliance between wireless microphone users and broadcasters. NAB, believing that a handful of licensees creates fewer headaches for its members than a million mobile unlicensed white spaces devices, is likely to favor CTIA’s proposal than cut a deal with white spaces proponents. But that would mean death to the wireless microphone industry. Wireless microphones depend on the availability of unoccupied channels. While wireless microphone manufacturers may say they doubt the ability of WSDs to protect them, they should not doubt that full power licensees will demand their removal. And with the prospect of auction revenues, the adorableness of the unauthorized user community of Broadway theater groups and megachurches will prove a much less potent tool for persuading members of Congress to side with the wireless microphone manufacturers.

Hanging over all of this is the invisible deadline of the end of this Administration and the transition to another. The folks at the FCC are unlikely to want to do anything radical as the clock runs down. And while there is always a possibility of slipping something into an appropriations bill, I think the mix of countervailing interests with strong lobbies and the overall complexity of the issue makes a Hill play (except as a pressure/diversionary tactic) unlikely.

So it will be a complicated few months here in white spaces land. “Interesting times” all around. Beats me how the heck it will come out.

Stay tuned . . . .