IP: Two comments on the FCC lifting spectrum caps

[David Farber <dave () farber net>]

Comment 1 --

"The Wireless Week in Review

Top news for the week of November 5-9, 2001.

1. TOPPING THE NEWS THIS WEEK

--In a textbook case of everyone getting what's needed instead of
what's wanted, the FCC gave its nod to sunsetting the spectrum cap,
albeit not as fast as some had requested. The long-debated cap will
disappear Jan. 1, 2003; until that time, it now stands at 55 MHz, and
carriers can request waivers if they exceed the cap in certain
markets. Commissioner Michael Copps cast the lone dissenting vote,
voicing the Democratic party line that questioned lifting the cap
because of the inevitable continuation of consolidation in what has
been a diversified competitive industry. Dismissing such thoughts was
FCC Chairman Michael Powell, who believes "markets can regulate as
well as any rule of law. It's fanciful to suggest that all benefits
of the wireless market flow from this one rule."

Not so, say other industry observers who believe the large fish will
swallow the small ones to satiate their hunger for more spectrum, now
that the chances of gaining it through reallocation are almost nil,
thanks to Osama bin Laden. Some even say the wireless industry, like
its wireline counterpart, will shrink to just a few large players
once the caps are gone for good. Powell asserts antitrust officials
won't be asleep at the wheel, but narcolepsy is not uncommon in the
communications industry."

Comment 2

> From: "Gerry Faulhaber" <gerry-faulhaber () home com>
> To: "David Farber" <dave () farber net>
>
> The point is...the facts in 1993 are not the same as they are now, which I
> thought I made crystal clear in my post.  The facts today do not support
> (and certainly not "demonstrably") continuing a rule that made sense
> (probably) in a different world.
>
> I must be missing something in your story.  You say large out-of-state firms
> (presumably this wouldn't have happened if they were large in-state firms?)
> bought up the spectrum and they aren't using it, but refuse to lease it to
> anybody.  Not sure if the FCC would let 'em lease it, but assuming the rules
> permit, this doesn't make any economic sense at all, and in my experience
> "large out-of-state firms" aren't stupid (no matter how much they overpaid
> for the spectrum).  There's gotta be something else going on that either you
> are not telling me or you don't know about.
>
> Now if they are willing to lease it to you but not at the price you like,
> well, I can sympathize.  I also find that lots of people won't sell me
> things at a price I want...Mercedes Benz, high-end workstations, private
> jets, etc.  There's just no end to the exploitation, is there?
>
> More seriously, I really do sympathize re: "shell companies" trying to cash
> in on the discount the FCC allowed "designated entities" in the wireless
> auctions.  Well-meaning FCC, but really stupid.  When you put an opportunity
> like that in front of people, they'll take it.  The problem was the FCC's,
> not the people that figured out how to game the system.
>
> Gerald Faulhaber
> Business and Public Policy Department
> Wharton School, University of Pennsylvania
> Philadephia, PA 19104
> 215-898-7860
>
> ----- Original Message -----
> From: "David Farber" <dave () farber net>
> To: "Gerry Faulhaber" <gerry-faulhaber () home com>
> Sent: Friday, November 09, 2001 9:53 PM
> Subject: Fwd: Re: IP: Comments on the FCC lifting spectrum caps
>
>
> >
> > >X-Sender: brett@localhost
> > >X-Mailer: QUALCOMM Windows Eudora Version 4.3.2
> > >Date: Fri, 09 Nov 2001 13:35:41 -0700
> > >To: farber () cis upenn edu, ip-sub-1 () majordomo pobox com
> > >From: Brett Glass <brett () lariat org>
> > >Subject: Re: IP: Comments on the FCC lifting spectrum caps
> > >
> > >At 01:07 PM 11/9/2001, Gerry Faulhaber wrote:
> > >
> > > >The strategy worked.  In the major metro areas, there are actually five
> or
> > > >six carriers and by any measure these markets are highly competitive.
> Firms
> > > >have dropped prices way, way below the bad old duopoly prices, service
> has
> > > >improved, and firms are truly rivalrous.  Did this occur because the
> FCC
> > > >placed the 45 Mhz ownership cap back in the early 1990s?  In my view, I
> > > >think it had a very beneficial effect.
> > >
> > >And now you're suggesting that we snatch defeat from the jaws of
> > >victory by changing the rules? I don't think so.
> > >
> > >Look what has happened in bands where such rules don't exist.
> > >All of the spectrum for wireless data services in our area
> > >(LMDS, MMDS, etc.) has been bought up by large, out-of-state
> > >companies which paid far too much for it (their bids were
> > >speculative) and refuse to rent it to local providers at a
> > >price where those providers can break even. In some cases,
> > >the bidders were small companies formed as shells by (and
> > >funded by) huge corporations so that they got up to a 45%
> > >discount that should have been reserved for truly small
> > >businesses.
> > >
> > >It's a tragedy that our own community can't get spectrum
> > >to run wireless Internet on licensed bands. It'd be worse
> > >if the same applied to cell phones. Why are you opting
> > >for a policy which would -- demonstrably -- cause this
> > >to happen?
> > >
> > >--Brett Glass
> >


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