New wireless spectrum auctions will offer wireless carriers room to expand

cell-towersAs part of the pending legislation to extend payroll tax reduction benefits, wireless consumers and telecom companies got some sorely-needed good news on Thursday: Congress has tentatively agreed to auction off an estimated 120MHZ of wireless spectrum, in addition to allotting and funding a new national emergency communications network. Given that new spectrum legislation has been on the table for at least two years with very little meaningful progress, this should be viewed as a promising step forward.

“Today’s action to make repurposed broadcast spectrum available for wireless broadband service is vital to ensuring America’s wireless industry remains the world’s leader in the deployment of 4G services,” said Steve Largent, the president of CTIA, a wireless industry trade organization, in a statement issued on the CTIA blog.

Why spectrum matters

Although the wireless spectrum debate can get decidedly wonky very quickly, it essentially works like this: A limited amount of wireless “space” exists for the use of all wireless devices, from mobile phones to televisions to radios, and if the likes of telecom giants such as Verizon and AT&T are to be believed, we’re running out of it very quickly. According to an annual study released by Cisco, “In the United States, mobile data traffic will grow 16-fold from 2011 to 2016, a compound annual growth rate of 74 percent.” In other words, “mobile data traffic in 2016 will be the equivalent to 4x the volume of the entire US Internet in 2005.” The entire Internet.

With that said, there isn’t need to panic… yet. There may be hundreds of television stations out there that are actually allotted more spectrum than they are using. By holding “incentive auctions,” as the legislation mandates, these television broadcasters will put their unused spectrum on the auction block, to be sold to the highest bidder. While the government will get most of the proceeds from the sales (after all, spectrum is licensed to broadcasters, but it’s owned by the government), broadcasters will make a tidy profit, hence the “incentive.”

It is estimated that the sale could bring in the neighborhood of $30 billion — wireless companies are willing to pay stupendous premiums for extra spectrum, because there is little else they can do to expand their network capacities. Of the estimated proceeds, an additional $7 billion will be invested in a “nationwide interoperable public-safety broadband network,” which will preside on the 10MHZ of currently unused spectrum left over from the last 700MHZ spectrum auction in 2008 —the auction in which Verizon, AT&T, and television provider EchoStar among others, spent nearly $20 billion snatching up wireless waves.

Who wins?

If there existed a win-win scenario in politics or in life, a wireless spectrum auction would be the closest thing to it. The federal government makes an astronomical profit by selling something as ethereal as airwaves, of which they will use, in this case, to fund payroll tax breaks and Social Security benefits. Wireless communications companies are given the invaluable opportunity to supplement their current network infrastructures and introduce bigger, faster, better mobile broadband services that they will in turn charge consumers more money for. And consumers, who are in this case really just an afterthought, continue to place calls and surf the Web from their mobile devices without experiencing the Internet equivalent of rolling blackouts. Although the FCC remains legally able to set restrictions on who can and can’t participate in the auctions, according to the new bill there is a lengthy process involved in doing so — leaving the potential open for a single corporation with enough financial resources to snatch up disproportionate amounts of spectrum, which could ultimately be bad for consumers. Because a three-day waiting period is customary in congress after new legislation is introduced, we can expect a vote on the new bill as soon as Saturday.