Spectrum worries at CES: Deja vu all over again

The message at CES's Tech Policy Summit was all about the looming crisis brought on by exploding demand for mobile broadband. But the FCC's vision for a fix is largely reheated.

Larry Downes
Larry Downes is an author and project director at the Georgetown Center for Business and Public Policy. His new book, with Paul Nunes, is “Big Bang Disruption: Strategy in the Age of Devastating Innovation.” Previous books include the best-selling “Unleashing the Killer App: Digital Strategies for Market Dominance.”
Larry Downes
7 min read
Editor's note: This is a guest column. See Larry Downes' bio below.

LAS VEGAS--The message at yesterday's CES Tech Policy Summit was all about spectrum, and the looming crisis brought on by exploding demand for mobile broadband relying on limited frequencies. Speakers including FCC Chairman Julius Genachowski and three of his four fellow commissioners all sounded the same theme: the FCC's top priority for the coming year will be to unleash more spectrum, before it's too late.

"Without action," Genachowski said yesterday, "demand for spectrum will soon outstrip supply."

No one in the audience, including industry representatives, consumers, and manufacturers of the exciting new wireless devices and services on display on the show floor, would disagree. As new 4G devices and services, Internet-enabled televisions, device-to-device communications services, and a remarkable range of new apps are announced, users are already pushing the limits of existing mobile capacity.

Deja vu all over again
But as Yogi Berra famously said, it's deja vu all over again.

What few here seem to remember is that Chairman Genachowski and other government officials sounded the same alarm precisely a year ago at last year's CES, making the same promises to prioritize ways of freeing up additional spectrum.

In his 2010 remarks in the very same room, Genachowski spoke of the same "looming crisis" and the need to resolve it quickly. Then, the chairman identified three key areas for heading off disaster: (1) freeing up spectrum that is unused or underutilized, (2) liberalizing spectrum-use rules to allow license holders to lease unused frequencies or otherwise make more flexible use of what they have, and (3) encouraging device manufacturers to build in intelligence that will make better use of available spectrum.

But in the intervening year, the FCC has been distracted by litigation and political controversy swirling around Net neutrality rules finally voted on just before the end of the year.

Now the price for that distraction is becoming clearer. Little has been done to advance many of the worthy goals of The National Broadband Plan, which was issued by the agency in March 2010. In the area of spectrum reform, for example, the plan called for the immediate reallocation of up to 500MHz of spectrum to support mobile broadband, seen as a key technology in getting Internet access to poor and rural Americans who have been slow to adopt it.

To date, according to the chairman's comments yesterday, the agency has freed up only a paltry 25MHz, and that came by easing restrictions on the authorized uses of wireless communications services. The commission also issued a long-awaited order in September that permits unlicensed devices to begin using broadcasting "white space" (unused spectrum between stations) so long as this doesn't conflict with those parts of the frequency that broadcasters are actually using.

One sign of just how far the spectrum crisis fell from the FCC's priorities is the fact that the agency hasn't even begun compiling an inventory of existing spectrum allocations called for by President Obama in June. Without knowing who among public and private parties holds what allocations, it seems likely that some easy opportunities to optimize usage remain hidden.

But when asked yesterday about the status of the inventory, FCC Senior Advisor Rebecca Hanson replied that the agency has only gotten as far as changing the user interface of the agency's Web site to make it easier to search for who holds a license. As for the inventory itself, "We'll be announcing progress on an ongoing basis," she told a CNET reporter.

Pinning hopes on voluntary incentive auctions
Instead of progress, Chairman Genachowski yesterday laid out a largely reheated vision for how the agency will work in the coming year to solve the problem he so clearly articulated a year ago.

The chairman's prepared remarks, for example, indicated four "pillars" on which the agency will craft a solution to the crisis before it's too late. These are (1) Eliminating restrictions the FCC has placed on the use of spectrum; (2) encouraging more innovative and efficient uses of existing allocations, including spectrum sharing and allowing licensees to lease unused allocations; (3) promoting competition, transparency, and innovation on mobile platforms; and (4) spurring deployment of new infrastructure by cutting red tape that delays the build-out of new cell towers and other wireless assets.

Most of these ideas are simply rehashes of last year's proposals--indeed, of goals the agency has promoted in some cases for years.

The one relatively new idea, which Genachowski deemed "essential" to promote all four of his pillars, is the rollout of "voluntary incentive auctions." These auctions would allow over-the-air television broadcasters, who are believed to hold the most valuable and most underutilized spectrum, to offer up some or even all of their remaining allocations for the FCC to auction off to mobile broadband providers.

At a panel discussion yesterday, the FCC's Hanson emphasized that the auctions would be voluntary. Station owners could decide how much, if any, of their allocation to sell, and set the reserve price. The government and the owner would share in the proceeds of the auction.

What makes TV spectrum so attractive? For one thing, following the transition to digital TV, local TV stations retained 6MHz of allocated frequency, capable of handling up to 19.4 megabits of transmission. According to Tom Wheeler of Core Capital Partners and a longtime industry veteran, only 2 to 3Mbps are needed for the digital TV signal itself. Assuming technical issues are resolved, broadcasters could give up much of their allocations without interfering with their ability to broadcast.

But even a small portion of the existing allocation may be more than many broadcasters actually need. Given the widespread adoption of cable, satellite, and other wired TV reception from companies including Comcast, AT&T, and Verizon, many local broadcasters reach fewer and fewer homes. Some estimates put the decline in over-the-air viewership to as few as 10 percent of American homes. As a result, many broadcasters are facing dwindling ad revenues and poor prospects for near-term survival.

While some stations may transition to offering mobile services of their own, many are likely to go out of business in the coming decade. Indeed, given the poor market conditions for station acquisitions, voluntary auctions may be the most effective way to speed up an inevitable reconfiguration of the broadcasting industry and free up crucial spectrum in the process. Lynn Claudy of the National Association of Broadcasters characterized that process as "thinning the herd."

For those who choose to stay in the current business, selling off some of their unused spectrum, or sharing a single allocation with other local stations and selling off the excess, could provide needed capital to reinvest and reinvent themselves.

The incentive auctions, in which broadcasters would share in the revenue from releasing their allocations, would also avoid the thorny question of whether station owners actually maintain property rights to keep their spectrum if the agency determines there are better uses for it. That is a legal question that no one is particularly eager to engage.

Congress would need to act
But there's a fly in the ointment. Everyone agrees that under existing communications law, the FCC has no authority to hold these auctions.

In July 2010, then Congressman Rick Boucher (D-Va) introduced legislation that would have authorized the FCC to conduct voluntary incentive auctions. Though the bill received bipartisan support, the last Congress failed to pass it. In the November elections, Boucher lost his seat, and Republicans now control his former Subcommittee on Communications, Technology, and the Internet.

Appearing yesterday as an unannounced speaker at the Tech Policy Summit, Boucher expressed optimism that the new Congress will move forward on the legislation. If not, he said, the spectrum crisis is likely to become "acute" by 2015.

So for now the FCC is stuck with little more than a plan, and one that assumes broadcasters will voluntarily loosen their grip on as much as 500MHz of much-needed spectrum.

If Congress doesn't act, or if the broadcasters don't volunteer, there's little in the way of a backup plan.

And as FCC Commissioner Robert McDowell pointed out later in the day, even if authorization comes soon, it will still take a decade to design and conduct the auctions to the point of getting usable spectrum available for consumer use.

McDowell, however, is optimistic about a private solution. He believes salvation may come instead from technological innovation, including the deployment of home cellular base stations called femtocells and smart antennas that can compress mobile data streams more efficiently and dynamically.

"We're entering the golden age of wireless," McDowell said, despite the spectrum crisis. "Anxiety will push innovation."

Despite the dire conditions, Chairman Genachowski also remained optimistic. "As the leader of the global economy in the 20th century," he concluded, "and as the greatest country in the world for innovation, entrepreneurship, and free markets, the U.S. has huge advantages in the race for global economic leadership in the 21st century."

Only the FCC can reallocate the limited radio spectrum it regulates, and it can only do so if Congress acts. For the sake of the Internet economy and the innovation that fuels it, consumers have little more than hope that a series of policy miracles will take place in the near future.

At a minimum, the FCC can't afford to get distracted again. Let's hope next year's conversations will be about progress and not, once more, about goals.