net neutrality and the spectrum quest
november 4, 2009
By Tom Wheeler
The Defense Department, the largest user of domestic spectrum, is already drawing the battle lines. “Spectrum is the oxygen required for the war fighter,” the head of the department’s spectrum organization recently warned. Piling on, an Army Colonel said, “We can never have enough bandwidth.” The ability to convince the DoD to part with some of their spectrum, like they did in 2002, would seem especially challenging in the midst of two wars.
The other obvious place to look for spectrum is in the television broadcast bands. When only 10 percent of households rely exclusively on over-the-air signals and digital technology can cram most market’s existing signals into a single license allocation, the question gets asked whether there might be a higher and better use for those airwaves. The broadcasters, however, are mounting their own “hands off my spectrum” assault. “When the work is done, people will figure out there is no ‘spectrum crisis.’ It’s rhetoric akin to ‘weapons of mass destruction’ and is politically motivated,” raged Brandon Burgess, CEO of Ion Media.
FCC Chairman Julius Genachowski disagrees with WMD analogy, however. The leader of the agency that assigns the airwaves warned, “the biggest threat to the future of mobile in America is the looming spectrum crisis…I believe one of the FCC’s highest priorities is to close the spectrum gap.” Observing, “there are no easy pickings on the spectrum chart,” Genachowski nonetheless said, “we have no choice. We must identify spectrum that can best be invested in mobile broadband.”
Unstated in the FCC chairman’s warning of the spectrum gap is how one of his other policies, net neutrality, will further increase the demand pressure on wireless networks. If the idea of net neutrality is to assure networks are open to all comers, then those entrants will further increase the pressure on the existing airwaves and the need for more spectrum. Smartphone apps alone average 30 times the throughput demand of a feature phone. With smartphones projected to soon constitute half of all phones sold and with a “ya’ all come” policy of open access, it doesn’t require a math major to divine the spectrum consequences.
So, in a world where spectrum licensees are unwilling to part with their assignments and the spectrum agency wants to help while at the same time increasing demand, why isn’t net neutrality an opportunity for the wireless industry? Viewing the current spectrum and net neutrality issues holistically rather than in isolation just might be an opportunity for both the wireless industry and the Administration.
President Obama campaigned on his support for net neutrality. Thus, it should come as no surprise that his FCC chairman has moved promptly on the matter, or that a Democrat-controlled commission is likely to adopt it. How it is implemented thus becomes more important than whether it exists. Rules that recognize the unique characteristics of a spectrum-based service and allow for reasonable network management would seem to be more important than the philosophical debate over whether there should be rules at all. Similarly, a rule that allows for variable pricing is an opportunity for wireless carriers to change the revenue paradigm at a time when revenue per megabyte is in a freefall.
While net neutrality and decisions about additional spectrum are not directly connected in a policy sense, they are connected practically. The industry’s spectrum situation reinforces the wireless industry’s “we are different” message in the net neutrality discussion. At the same time achieving that additional spectrum would be a huge win for those who make a profit by managing spectrum-based networks.
The wireless industry’s initial reaction to net neutrality was to question its need and warn of “unintended consequences.” Accepting the inevitability of the concept, however, and working to maximize its positive effects – from appropriate network management, to flexible pricing and even new spectrum – could be the opportunity for a big win. AT&T’s comments on the Commission’s decision to issue the net neutrality proposal was that the draft had “allayed a number of our concerns” while still leaving “crucial issues” – that sounds like just such an opportunity to focus on the details.
There is a spectrum crisis looming. The battle lines have been drawn by those who don’t want their airwaves to be a part of the solution. At the same time a presidential campaign promise is poised to add even more demand to already stressed wireless capacity. As the Obama administration sits astride both issues the relationship between the two just might provide a win-win opportunity for the administration, wireless carriers, and the U.S. public.
Tom Wheeler is Managing Director of Core Capital Partners, a venture capital firm specializing in early stage companies, including next generation wireless services. For almost a dozen years prior to joining Core Capital he was the president of the Cellular Telecommunications & Internet Association.