The Duopoly’s Worst Nightmare

Posted by Sam Churchill on

Last year AT&T doled out $15.9 million for lobbying, says, on a range of issues. The Center for Responsive Politics, which tracks lobbying spending, reports AT&T spent the 11th largest amount of all companies that year, while Verizon ranked 18th.

The four biggest carriers together spent $37.3 million in 2013 trying to influence lawmakers and the FCC on a host of policy issues ranging from taxes to cyber security.

The 600 MHz spectrum — still more than a year away – could determine the fate of wireless competition in the United States. That’s because only the low frequencies enable cost/effective coverage for rural areas.

AT&T and Verizon have 700 MHz coverage – T-Mobile and Sprint don’t.

Smaller carriers want spectrum caps on the big carriers to prevent the “duopoly” from dominating the spectrum – like they did on the 700 MHz band.

Sprint, T-Mobile and Dish Network list “four principles that should serve as the foundation of any spectrum aggregation policy,” according to their joint filing with the FCC.

Six Republican House lawmakers — including Fred Upton, R-Mich., chairman of the Energy and Commerce Committee, which oversees the FCC, and Greg Walden, R-Ore., chairman of the committee’s communications and technology subcommittee — wrote FCC commissioners in April in response to the Justice Department’s filing, arguing that spectrum caps “will reduce the potential revenues from the auction and possibly cause the auction to fail.”

The six authors, who also included committee members Marsha Blackburn from Tennessee, Ed Whitfield from Kentucky, Billy Long from Missouri, and Robert Latta from Ohio, received among the largest campaign contributions in Congress from AT&T’s and Verizon’s PACs for the 2012 elections — a total of $107,000 from both carriers, according to CRP.

T-Mobile’s and Sprint’s PACs gave the group as a whole about half that much, a total of $42,000, according to the center.

The duopoly would like to stop competitors like Dish, Sprint and T-Mobile from offering cost/effective 600 MHz service. Smaller carriers want to stop the duopoly from dominating wireless broadband.

In February, Sprint proposed the FCC adopt a “weighted wireless broadband spectrum screen” that would accord competitive advantages to spectrum under 1 GHz. It’s aimed at the duopoly which now dominates 700MHz and 800MHz spectrum ownership.

According to a study commissioned by T-Mobile, covering Arizona with 700 MHz LTE would cost $19 million, but it would cost $58 million to cover the same area with 1900 MHz. Only one-tenth the number of towers are required to provide coverage at 600 MHz compared to 2.6 GHz. That’s why 700 MHz can cost $1 Mhz/pop vs $.10 Mhz/pop for 2.6 GHz.

The low frequencies also penetrate walls better, improving indoor reception. The downside is that ten times the number of users must sometimes share a single 700 MHz tower on AT&T or Verizon – which is why their LTE speed is now eroding.

As a general rule, higher frequencies are better for high-capacity urban coverage, lower frequencies are better for low-density rural areas. The 600 MHz band has the potential to provide cost/effective, nationwide coverage.

Google, Facebook and Apple could use their data centers to deliver cheap (even free) wireless broadband — subsidized by ad revenue. They could also eliminate costly and obsolete legacy architecture with Voice over IP.

Some industry observers believe basestations in the cloud will dominate in the future, especially in urban settings. They could save billions and enable a tiny footprint, say industry observers, while providing fiber to communities. Cloud RAN in urban centers and 600 MHz for nationwide coverage may be the best of both worlds.

Dish has 55 MHz available while Sprint has 120 MHz in the 2.6GHz band. A partner like Google or Facebook could make the 600 MHz band come alive and deliver REAL competition — both urban and rural.

It’s the duopoly’s worst nightmare.

Who am I to ‘dis the big carriers — but if the duopoly carriers had their way the $100 billion/year app marketplace and the global smartphone phenomena would never have happened (See: Equal Access Happy Talk and FCC Finalizes Rules on 700MHz).

The carriers wanted to stop independent app stores in the name of “security”. FCC Chairman Kevin Martin brokered a deal just before the 2007 auction of 700 MHz that incorporated parts of Google’s proposal for more “open” phone architecture.

The rest is history. According to comScore, fully 65% of all mobile users in the U.S. already own smartphones. At 156 million consumers, that’s roughly half the U.S. population. By 2017, 1.7 billion smartphones are expected to be shipped, worldwide.

Rep. Greg Walden (R-Ore.) warned the FCC against limiting the participation of AT&T and Verizon in next year’s 600 MHz auction through the use of spectrum caps.

But a duopoly hurts the economy. Everybody wins when competition is given a chance to succeed.

Posted by Sam Churchill on Monday, March 24th, 2014 at 8:17 am .

2 thoughts on “The Duopoly’s Worst Nightmare

  1. Outstanding article. You present a comprehensive overview of the situation and the real consequences for consumers. Other than writing letters (and voting) to uncaring and unresponsive Congressional representatives, do you have suggestions how citizens can leverage the situation in our favor?

  2. That’s an excellent question, CDB. I’m not much of a political activist, but perhaps one step would be to contact supporting groups that encourage telecom competition. I don’t think we have enough of it in the United States.

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