Imagine a small room filled with very large people who truly don’t like each other and all of them need the same thing that is in rapidly short supply. In that scenario, it doesn’t take long for multiple fights to break out and behind closed doors, one can hear the sounds of blows being landed and furniture breaking. Occasionally a door pops open and the fight spills into the corridor, in public view.
That pretty much sums up the state of spectrum allocation these days as the major wireless phone carriers, broadcasters, and the federal government tangle over how much anyone can have and how much it will all cost. It’s tempting to watch the fighting, shrug, and just move on, thankful that you aren’t part of the struggle. But the outcome should concern everyone, because the financial impact could be huge and potentially disastrous for consumers in the long term.
One such glimpse of the infighting occurred just 8 days ago during a normally snooze-worthy earnings call between AT&T and analysts. Randall Stephenson, AT&T’s chief executive, suddenly launched into bitter complaint about the difficulty in acquiring more spectrum, charging the FCC with dragging its feet and being inconsistent in its rules. The FCC fired back soon after, issuing a statement that Stephenson was ignoring the “facts.”
Wireless spectrum – usable radio frequencies – is limited by nature and physics. It can’t be artificially manufactured in a lab. Smartphones and tablets are gobbling up increasingly huge amounts of spectrum needed to operate smoothly as they grow with consumer demand. This is why the need for spectrum has suddenly become a huge battle. And Stephenson raised the possibility on January 26 that we could see an even larger increase in cell minute prices and restrictions in data usage if the spectrum shortage wasn’t improved soon.
Even the legendary Steve Jobs knew what was coming. It was revealed by venture capitalist John Stanton last November that Jobs considered building Apple’s own unlicensed wi-fi cell network before he died.
There really is only one place to find more spectrum and that’s in the large amount controlled and owned by the broadcasters who have operated in this space going back to the time when there were only 4-5 major on-air channels and color TV was quite the new fad. And, unsurprisingly, the only way that the major wireless cellphone carriers are going to get that spectrum from broadcasters is from their cold, dead hands.
Of course, there’s always money…a lot of money. There is a growing belief that the FCC will encourage the TV stations to give up their spectrum through “incentive auctions” where broadcasters who voluntarily surrender the precious bandwidth for auction would be allowed to share in the proceeds, which could be eye-popping large. But the need for Congressional approval for such a plan has triggered a whole new set of fights and there is uncertainty over whether broadcasters will be willing to take the bait in any case. WWF wrestling seems tame by comparison.
The whole issue is starting to look like a bad poker painting, where dogs or cats are sitting around a table eyeing each other with malice and deep distrust. As AT&T’s Stephenson said on his now infamous earnings call, “There are no secrets. Everybody knows where the spectrum resides and who is holding it.” All that’s left is a show of cards to see who has the strongest hand for a really big pile of money. And, of course, the fight that will break out afterwards.
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