Julius Genachowski, the Federal Communications Commission chairman, thinks the end is near. His evangelizing isn’t spiritual but digital: The economy of the future depends on smartphones, tablet computers and other wireless devices, and yet the United States faces a crippling spectrum shortage, he says.
Genachowski is right to worry about the U.S.’s digital future. Nearly 70 million people have a smartphone, which can use 24 times more airwave capacity than a regular cell phone. Tablet computers, now owned by about 11 million people, can use 100 times more capacity. A spectrum crunch would mean slower connections, longer downloads and dropped calls.
He and his allies in this mission, the large mobile carriers Verizon Wireless and AT&T Inc., have a solution: Take back unused spectrum from television broadcasters and auction it to the highest bidders (most likely Verizon and AT&T). If Congress approves, the FCC would reward the TV broadcasters by letting them share in the proceeds.
We see two problems. Some broadcasters don’t want to give up their spectrum (even if they’re compensated), and it’s not clear that the spectrum crunch is real. The FCC’s critics say this is an old-fashioned war between two entrenched interests – the TV guys versus the telecom guys – and the FCC has chosen the telecom side.
We’ll stay out of that fight, but we agree the FCC is confusing its role. Rather than play the middleman, the FCC should push for a true free market. All interested players, entrepreneurs included, should have an opportunity to license airwaves. To make this happen, the FCC should charge rent on the spectrum it licenses, then get out of the way.
Spectrum belongs to the public, but once the government auctions off parcels of megahertz to the highest bidders, it almost never takes them back, even if they’re not being used. That’s the case now with large blocks owned by broadcasters. The FCC wants to re-purpose that spectrum, located in the airwaves’ silk-stocking district: It’s very high quality, and the broadcasters are generally using it for low-audience shows like home shopping and religious services, or not at all.
Carriers, meanwhile, are hungry for spectrum. They have ambitious plans to roll out next-generation networks. Meeting demand by building more cell-phone towers and microwave networks is laborious and costly. But carriers can’t order a year’s worth of airwaves from a warehouse. AT&T sought to acquire Deutsche Telekom AG’s T-Mobile USA for $39 billion in large part to get its hands on T-Mobile’s spectrum.
Congress appears willing to go along with the FCC’s request for incentive auctions. The House recently approved them as part of an extension of the payroll tax cut. The Senate voted down the House package, but the measure is likely to come back to a vote. Congress wants the $20 billion the auctions could raise to pay for other things.
Estate and Corporate Income Taxes are changing next year, and business owners and executives should know the details. The PBN Summit on November 6th will provide those details and more - including how much Obamacare's Employer Mandate could cost.
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