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Two years into a decade-long plan to free up wireless spectrum to handle an explosion in mobile data traffic growth, Washington politics are crippling the Federal Communications Commission’s ability to reach any of its goals.
In March 2010, the FCC identified in its National Broadband Plan a dire need for more spectrum in the U.S. It outlined a timeline for getting 300 megahertz of spectrum in the pipeline by 2015 with an additional 200MHz opened up for auction by 2020. In total the plan would create 500MHz of new wireless spectrum that could be auctioned off, or nearly double the amount of spectrum currently available for wireless data.
FCC Chairman Julius Genachowski said he would make freeing up more wireless spectrum his top priority. He has talked about it often in one stump speech after another. But two years later, the agency is woefully behind on the plan it outlined as part of the National Broadband report. The reasons behind the hold-up are largely political.
“I am very proud of the spectrum chapter of the Plan; indeed, very proud that there even was one,” Blair Levin, who was in charge of drafting the National Broadband Plan for the FCC two years ago, said during a speech in January. “For a while I was optimistic we would march quickly toward our spectrum goals. I fear, however, we have gotten off course.”
What does this mean for wireless consumers?
Without additional spectrum in the pipeline, wireless networks will become more congested, which means slower downloads for consumers at peak times in densely populated areas. Many in the wireless industry have already called the looming shortage a “spectrum crisis.” Ultimately, carriers will have to get more creative about how they use their existing spectrum, which will likely result in stricter caps on usage. Consumers who use more data will likely be charged higher prices for that data.
“Consumers are already feeling the pain,” said Larry Downes, a communications policy consultant and author and CNET blogger. “Wireless operators are simply going to have come up with a Plan B.”
Indeed, traffic on wireless networks is growing at a tremendous rate. In the FCC’s National Broadband Plan in 2010, the agency said that AT&T had reported a more than 5,000 percent increase in traffic on its network in the previous three years. Just this week, John Donovan, a senior executive at AT&T, said in a blog post that AT&T’s traffic has been doubling every year since 2007. In fact, over the past five years, data traffic has grown by 20,000 percent, Donovan said.
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And it doesn’t look like traffic growth will slow anytime soon. In a new report issued by Cisco Systems, which tracks data growth on mobile networks on an annual basis, mobile data traffic in the U.S. will grow 16-fold from 2011 to 2016 at a compound annual growth rate of 74 percent. And by 2016, mobile data traffic in the U.S. will be equivalent to four times the volume of the entire U.S. Internet in 2005.
How did we get here?
Despite bipartisan support for a spectrum bill that would generate billions of dollars in revenue for the U.S. government by reallocating unused TV broadcast for wireless broadband use, the FCC has still not gotten the necessary authorization from Congress to even begin designing the auction or identifying spectrum that could be sold in the auction. After months of wrangling, however, a compromise may finally have been worked out. On Thursday, Congressional leaders said they have tacked on authorization for spectrum auctions as part of a bill extending payroll tax cuts and unemployment benefits now before Congress.
And just this week, the FCC put the kibosh on the use of 40 MHz of satellite spectrum owned by the startup LightSquared, because of a very successful lobbying effort by the GPS industry to kill the network.
As for other spectrum outlined in the plan, the federal government is still sitting on about 90 MHz to 95 MHz of spectrum that it has still not begun to clear for commercial use.
All told, the FCC is at least a year behind in reallocating almost every sliver of wireless spectrum it identified as a possible auction candidate in the 2010 report. As a result, it’s extremely unlikely the FCC will even come close to reaching its goal of getting 300MHz of wireless spectrum into the market by 2015.
Here’s a detailed look comparing the FCC’s five-year plan for several specific swaths of spectrum, all outlined in the National Broadband Plan, with what has actually happened to the spectrum identified in the report.
2.3GHz Wireless Communications Service (WCS) Rules (20MHz)
The WCS spectrum in the 2.3GHz band was first auctioned in 1997, but due to rules that would help prevent interference with satellite radio providers such as Sirius-XM, the spectrum wasn’t that useful for wireless broadband. Despite new rules that were passed in May 2010 to help make this spectrum more useful for wireless broadband, it’s still not that valuable.
In fact, AT&T, which was willing to spend $39 billion on T-Mobile USA for its spectrum last year, was also trying to get rid of its WCS spectrum. The company acknowledged this spectrum wasn’t of much value for building its 4G LTE network in a blog post written by Joan Marsh, a vice president of regulatory affairs for AT&T, on October 27, 2011.
“The WCS service rules effectively require 2.5 MHz of each block to be used for a guard band against interference,” she said. “The 2.5 MHz of remaining spectrum in each block is not suitable for LTE or even HSPA, both of which require wider channels and paired spectrum.”
Advanced Wireless Service 2 and AWS 3 and federal spectrum (60MHz)
In its original plan, the FCC proposed auctioning up to 60 MHz of spectrum from the Advanced Wireless Services (AWS) bands, which also included about 20MHz of reallocated 1.7 GHz (1755MHz – 1850MHz) spectrum used by the federal government. The idea was that this spectrum could be paired with 20MHz of AWS-3 spectrum. The FCC had hoped the National Telecommunications and Information Administration would complete its analysis of the spectrum by October 1, 2010. At that point, the FCC would have been able to move forward with reallocating the spectrum.
In January 2011 the NTIA said that it would evaluate the 1755-1850 MHz band of spectrum for commercial use. But so far, NTIA has not released information on the progress of this evaluation. And some in Washington blame the Defense Department for dragging its feet.
700MHz D Block Auction (10MHz)
The D Block spectrum is a 10MHz chunk of spectrum that was supposed to be auctioned off during the rest of the 700MHz auction. The spectrum came from television broadcasters vacating those airwaves as part of the transition from analog TV broadcasting to digital.
The rules of the D Block auction stipulated that it would be sold to a commercial service provider who would share the network in times of crisis with the public safety community. But the rule was deemed too restrictive by bidders, and the minimum price for this spectrum was never reached. Since then, the FCC has been trying to decide what to do with the spectrum.
The FCC’s National Broadband Plan recommended that the D Block spectrum be auctioned off for commercial use with technical requirements that would allow public safety to have access to the spectrum.
But public safety groups lobbied Congress to give them the entire 10MHz of wireless spectrum for free, so they could build their own network without allowing any of the spectrum to be used for commercial services. For more than a year, the D Block spectrum was engulfed in a political debate in Congress. Finally, a compromise was hashed out that would give public safety the spectrum and would even provide funds to build its network.
Because the D Block is being considered as part of a larger spectrum auction package, the bill has not yet become law. That said, the most recent Payroll Tax compromise bill will include the D Block compromise and funding for the public safety network.
One thing to note is if the D Block is given to public safety, this means that 10MHz of prime 700MHz spectrum, which is already cleared and ready for use and would have been ideal for 4G LTE services, will not be used by commercial operators to help alleviate network congestion. In other words, another 10MHz of spectrum will be lost.
Terrestrial Deployment of Mobile Satellite Spectrum (MSS) (90MHz)
Several years ago, the FCC changed the rules so that satellite providers could also supplement their space-based networks with on the ground terrestrial services. But the outdated rules have made it difficult for satellite spectrum license holders to offer a terrestrial-only service. As a result, about 90MHz of wireless spectrum has simply been underutilized. The National Broadband Plan outlined a strategy so that this spectrum could be used for land-only wireless broadband services.
As a first step toward this goal, the FCC granted a waiver to the wireless broadband startup LightSquared in January 2011 on the condition that its network didn’t interfere with other spectrum holders, namely GPS.
LightSquared was planning to use 40MHz of the total 90MHz the FCC had identified as possible wireless broadband spectrum in the satellite bands. LightSquared’s network, which would have sold wholesale 4G LTE access to other carriers and retailers offering wireless services, would have covered more than 260 million consumers. And it would have offered another major competitor in a market that is dominated by AT&T and Verizon Wireless. LightSquared expected at least part of its network to be up and running in some regions of the country by the end of 2012.
But again politics intervened. Despite the fact that LightSquared and its predecessors have owned this wireless spectrum since 1989 and despite the fact that the FCC cleared the spectrum for terrestrial use in 2005, the GPS industry managed to kill the company’s hopes of building its network, because it claimed the network would interfere with existing GPS devices.
LightSquared offered concessions to mitigate the interference. But in a test conducted by the NTIA, results still showed interference. LightSquared said the tests were rigged and that the GPS industry selected out of date and obsolete equipment to be tested.
The fight over LightSquared had become so politically charged in recent months, that pretty much everyone in Washington expected the NTIA and FCC to cancel the conditional waiver. And that is what happened earlier this week.
LightSquared has vowed to continue its fight. But Jeff Carlisle, executive vice president for regulatory affairs, noted that if the GPS industry prevails against LightSquared, it will continue to challenge any other company looking to make commercial use of spectrum in the satellite bands.
“There are other satellite bands that could be used for mobile broadband,” Carlisle said. “But the problem is that most of it sits right around the 24MHz of spectrum the GPS industry uses. And essentially they want to keep a 40 MHz to 50 MHz buffer on either side of them to ensure there is no interference.”
In other words, Carlisle said that the GPS industry wants to tie up 100MHz of spectrum so that it can use 24 MHz worth of spectrum.
“Without requirements on these GPS receivers, there is no incentive for the GPS industry to use the network resources more efficiently,” he added. “And if that continues to be the situation, then you can forget about making any significant amount of spectrum available.”
TV Broadcast Spectrum (120MHz)
The most ambitious piece of the National Broadband Plan called for freeing up 120MHz of spectrum from TV broadcasters. This spectrum is highly valuable for wireless broadband use because it propagates over longer distances and can penetrate through walls and other obstacles. The National Broadband Plan proposed that the government ask TV broadcasters to hand over unused spectrum for auction in exchange for taking a cut of the auction proceeds.
According to the plan, the FCC hoped to get authorization for the auctions in 2011 and then begin the auction process in 2012 or 2013. And it anticipated that the spectrum could be cleared and ready for use in 2015.
Levin, who was in charge of writing the broadband plan, said recently he has been disappointed by the inaction of Congress.
“We were hoping that Congress–in which there is a rare bipartisan agreement on the wisdom of incentive auctions–would quickly pass a one-sentence bill saying ‘The FCC should have authority to share auction proceeds with any licensee who turns in its license to allow the spectrum to be auctioned,’ he said. “We wanted a simple expansion of auction authority. Two years later, we still have a bipartisan consensus. But we have no new auction authority.”
Indeed, as with the D Block spectrum and LightSquared, the so-called “incentive auctions” have become highly politicized, which has resulted in deadlock and inaction. While both Democrats and Republicans agree that incentive auctions will help bring much-needed revenue into government coffers and simultaneously help relieve the impending spectrum crunch, they disagree on how the FCC should be allowed to conduct the auctions.
And that has become a major sticking point for authorizing these auctions. In the Republican-controlled House of Representatives, the proposed bill would change the law and restrict the FCC from being able to add conditions to the spectrum auction, as it has been able to do in every auction since 1993. And in the Democrat-controlled Senate, the bill gave the FCC the same authority in conducting auctions it has always had.
Now it looks as though the two sides have finally reached a compromise. Because the incentive auctions will generate billions of dollars in revenue for the government, auction authorization is part of the Payroll Tax extension bill that is winding its way through Congress.
On Thursday, Republicans and Democrats said they reached a compromise on the total Payroll Tax package. And in this latest piece of legislation, there is also a compromise on the incentive auctions. The new bill does not include the restrictive language of the House bill, but the FCC’s authority has been limited a little bit. In other words, neither side got exactly what it wanted, but it’s a compromise everyone seems to be able to live with.
What’s next?
While it is good news that Congress may finally be moving toward authorizing the first major block of new wireless spectrum for auction, the political roadblocks that have stood in the way the past two years don’t look to be easing. And it will likely continue to be difficult for wireless operators to get the wireless spectrum they all say they desperately need.
That will likely put more pressure on wireless operators to look for more spectrum through mergers as well as to introduce new wireless service plans to encourage more efficient data use.
“These goals are going to be very hard to meet,” Downes said. “There’s no question that wireless industry is going to have to get very creative to stay ahead of demand.”
