That’s a lot of clams, even to the federal government. But that’s approximately how much the Federal Communications Commission (FCC) will be leaving on the table if they restrict some bidders during their upcoming spectrum incentive auctions, according to economists Robert J. Shapiro, Douglas Holtz-Eakin, and Coleman Bazelon. In their study published by Georgetown University, “The Economic Implications of Restricting Spectrum Purchases in the Incentive Auctions,” the trio warn that limiting just two participants — Verizon and AT&T — from taking part in spectrum auctions could “reduce auction revenues by about 40 percent.”
But wait, there’s more. The group also estimates that forcing certain providers to watch from the sidelines could raise consumer bills by 9 percent. In short, the federal government will be refusing money, and consumers will be paying more money for their wireless service.
If that sounds backward to you, you’re not alone.
The fact of the matter is providers big and small desperately need more spectrum to meet the customers’ demands. The unprecedented popularity of smartphones and tablets — and all the mobile data their owners use — are taxing networks. It’s a problem former FCC Chairman Julius Genachowski called “America’s looming spectrum crisis.” And unless more airwaves are freed up for wireless use soon, the word “looming” will no longer apply.
Congess’ bold incentive auctions — which, in a nutshell, will enable broadcasters to voluntarily sell their spectrum holdings in exchange for compensation — are aimed at helping alleviate this problem. On paper, the auctions could be a boon for both the broadcasters and the federal government, and wireless providers will be able to breathe a bit easier knowing their networks won’t suddenly seize up due to overcapacity. Call it a win-win-win.
Actually, call it four wins. The tech industry will also benefit, since more spectrum will mean more powerful and reliable wireless network capabilities. Bigger pipes, as they say, for bigger ideas.
But in order for us to rack up all these wins, the FCC must ensure the same rules apply to every bidder across the board. Restricting some carriers from being able to purchase the spectrum they need at auction won’t foster competition; if anything, it fosters the spirit of uncompetitive behavior.
Whatever framework the FCC decides upon should depend on two factors: getting the most bang for the spectrum buck, and perhaps more importantly, ensuring that those bidding are able to put newly acquired spectrum to use quickly and efficiently. After all, airwaves purchased and locked in the vault won’t help anybody.
That’s what makes the idea of restricting some providers from fully participating in the spectrum auctions about more than the potential loss of billions in much needed revenue for the federal government. In the end, consumers — the very ones the FCC are theoretically trying to help — will end up losing the most, either through higher prices or declining service quality. Those are two consequences consumers shouldn’t have to face.