A Briefing On Public Policy Issues Affecting Civil Liberties Online from The Center For Democracy and Technology
(1) Airwave Auction a Unique Opportunity to Promote Broadband, Openness
(2) Adding a New Broadband Option a Critical Goal
(3) Auction Rules Should Include Neutrality Requirements
(4) Wholesale Spectrum Access Will Guarantee Greater Competition, Choice
No later than January 2008, the Federal Communications Commission (FCC) will begin auctioning off the portion of the public airwaves that is being returned by broadcasters as part of the transition from analog to digital broadcasts. The auction offers a unique opportunity for the FCC to promote the development of new, competitive alternatives for broadband Internet service.
The 60 megahertz (MHz) of spectrum at issue, in the so-called “700 MHz band,” is particularly valuable because of its propagation characteristics. Unlike spectrum at some other frequencies, it can transmit signals that will easily pass through walls and does not require a clear “line of sight” between transmitter and receiver. As a result, the spectrum will likely be attractive to a variety of bidders for various commercial purposes. The FCC is currently working to finalize specific auction rules that will set the parameters for allocating and using the spectrum.
The Center for Democracy & Technology (CDT) believes that the auction provides a critical opportunity to foster additional competitive choices in the broadband Internet market. Today, the vast majority of Americans have at most two real options for broadband – DSL from their local telephone provider or cable broadband from their local cable television provider. Wireless could offer a cost-effective way to help spur greater broadband competition, because it does not require the expense of laying new wires to individual homes. But wireless broadband requires spectrum, and most of the potentially suitable spectrum is already licensed for television and radio broadcasting, mobile phone networks, and other uses. The 700 MHz spectrum, which has been carrying analog television broadcasts but is due to be vacated by the broadcasters, represents a rare set of available, high quality, contiguous radio frequencies.
New broadband competition could benefit consumers in a variety of ways, as broadband provides a flexible platform that can carry all kinds of services, from voice to video to data. It also could help reduce any risks to the Internet’s essential characteristics of openness and low entry barriers for innovators. As CDT has pointed out in the “Internet neutrality” debate, recent changes to the legal regime raise the possibility that network operators could seek to exercise more “gatekeeper” control over what online services or applications their customers use. Creation of a viable wireless broadband option could help provide a competitive check against any efforts to move in that direction.
In comments recently filed with the FCC, CDT urged regulators to capitalize on the opportunity presented by the auction to promote neutral broadband Internet choices. CDT recommended that the FCC allocate a substantial portion of the spectrum for broadband. CDT further suggested that the FCC write its auction rules to ensure that such broadband is offered on a neutral basis and that some portion of it be reserved for wholesale use in order to create greater competition and choice. CDT believes that taking these steps will help maximize the potential of the spectrum as a means to increase broadband choice and Internet openness.
The FCC has before it two specific proposals that are in line with CDT’s recommendations. One was submitted by the Ad Hoc Public Interest Spectrum Coalition, and one by Frontline Wireless.
CDT comments (May 2007)
CDT Paper: Internet Neutrality (June 2006)
Over a decade ago, Congress passed the Telecommunications Act of 1996, directing the FCC to encourage the deployment of broadband services to all Americans. In 2004, President Bush announced his desire to see broadband Internet in "every corner" of the United States.
Unfortunately, a variety of studies indicate that U.S. progress on broadband has been slower than in many other countries. When the Organization for Economic Cooperation and Development (OECD) first began collecting statistics on broadband uptake six years ago, the United States ranked fourth among 30 nations. The United States now ranks fifteenth, down from twelfth just a year ago. Statistics collected by the International Telecommunications Union show the United States at a similarly low ranking. Extrapolating from FCC and census data, at least half of all households across the nation are still without a broadband connection.
Most consumers who do have broadband have a very limited choice of providers, receiving broadband service from either their cable or telephone company. The FCC's most recent survey revealed that in 37 percent of ZIP codes, consumers have only one of these choices, or neither. This number may actually represent an overly generous depiction of broadband choice, since the FCC studies are conducted such that a ZIP code is considered to be served by a broadband provider even if only a single resident in the ZIP code has access through that provider, and since the FCC's threshold speed for broadband is low by today’s standards. The actual percentage of households without a true choice of broadband providers is probably much higher.
Spurring competition by allocating at least a portion of the 700 MHz spectrum for broadband will ensure the most versatile use of the band. The broadband Internet is an extremely flexible platform that can support all kinds of services, including some that have yet to be imagined. In the wireline context, broadband has been used as a vehicle for vigorous competition among providers of many types of applications that did not even exist a few years ago. With the limited amount of spectrum available, devoting as much as possible to the broadband Internet will maximize competitive benefits across a wide array of services, rather than restricting those benefits to a specialized service or application.
For all of these reasons, CDT has urged the FCC to seize the unique opportunity that the 700 MHz auction presents by requiring that adequate spectrum be auctioned for the development of a wireless broadband platform that can provide a real competitive alternative to wireline broadband offerings.
CDT believes that auction rules should require neutral, nondiscriminatory treatment of traffic on as large a portion as possible of the spectrum allocated for broadband. Establishing a neutral wireless broadband network will be the best way to ensure that a multitude of innovative services can flourish using the newly available spectrum.
Historically, Internet users have benefited greatly from the open and roughly equal nature of communications on the Internet, without gatekeepers to filter or favor particular content and applications. This open and neutral character has allowed the Internet to become a vibrant platform for new kinds of speech and media.
There is a major policy debate underway about whether new regulatory requirements are warranted to preserve this core element of the Internet's character. But whatever view one takes of the so-called “Internet neutrality” issue in the wireline or existing mobile wireless markets, the 700 MHz spectrum auction takes place in an entirely different policy environment. The spectrum is a scarce and extraordinarily valuable public resource. It also provides a clean slate where no private entity has any entrenched business plans or investment-backed expectations. Nor is there a serious argument that discrimination is somehow necessary to maximize deployment of new capacity, since the capacity is finite anyway and auction rules could include “use it or lose it” provisions. Finally, with a neutrality requirement for the auction, bidders would know all the rules and expectations and would craft business plans based on neutrality before the auction begins.
By establishing appropriate auction rules, the FCC can take an important step towards ensuring that neutral, general purpose Internet connectivity remains widely available as a marketplace option. That is not to say that neutral broadband services in the 700 MHz band would provide a complete solution to the difficult “Internet neutrality” debate. For example, wireless broadband may face capacity limits that prevent it from keeping pace over time with wireline broadband offerings. Thus, it may not offer a complete competitive substitute for wireline broadband, particularly for users interested in high-volume uses such as high definition video. Nonetheless, the 700 MHz auction offers an opportunity to ensure a neutral Internet option at a capacity level that is useful for many purposes – and to do so in a context that presents significantly fewer competing arguments than the Internet neutrality debate generally.
CDT also believes that at least some portion of any spectrum allocated to broadband should be operated on a wholesale basis, with access available for purchase by any retail ISP that is interested. This would be a vital step toward maximizing competition in the broadband market.
With the limited spectrum available in the 700 MHz band, it is unlikely that the band will support a sizable number of nationwide broadband licensees. Thus, the best way to substantially increase users' choice for broadband providers is to allow multiple retail ISPs to pay for access to the licensees’ spectrum. Because the spectrum is not currently owned by any private entity, many complexities of prior "open access" debates in the wireline world do not factor into the determination of the spectrum auction rules.
The open access wholesale model will only work, however, if there is sufficient spectrum for the wholesaler to support service by several ISPs concurrently; otherwise, the first ISP would use up most of the available spectrum and additional competitors would be foreclosed, much as if the open access regime were not in place. Any wholesale requirement therefore should apply on a large enough portion of spectrum to support multiple ISPs serving at competitive speeds.
Congress has required the 700 MHz spectrum auction to begin no later than January 28, 2008, although it is possible that the FCC will decide to start earlier. The FCC will need to finalize all of the rules for the auction – including how many separate blocks the spectrum will be divided into for bidding purposes, the geographic license areas, and any neutrality, wholesaling, or other service rules – well in advance of the start date to provide bidders with time to develop business plans and gather financing. Thus, it is likely that many of these decisions will be made over the coming months. CDT is hopeful that in making its decisions the FCC will seize the opportunity that this auction presents to promote a new, open, neutral wireless broadband offering.