It's All About SpectrumSaturday, April 07, 2007
Let’s see - 60 MHz of spectrum up for grabs in the 700-MHz band. It is the best spectrum yet to be auctioned, and everyone wants it. Of course the incumbents want it. Cyren Call and Frontline Communications make it look as though their proposals that give some to the public safety community are for the good of first responders, but they are really for the good of the two companies. Intel, Microsoft, Cisco, Google and a host of others want in on it, and now a coalition called “save our spectrum” wants to make sure the incumbents don’t get it or have to provide access to it during the bidding unless they go through affiliates. They are urging the FCC to “write rules that ensure consumers and the public are the ultimate winners in the auction…This spectrum, in our view, represents the last, best hope for meaningful competition in Broadband,” according to Jeannine Kenney, a senior policy analyst at Consumers Union.
So the fight is on for the spectrum that is to be auctioned, but I don’t get this latest group. Are they naive enough to believe that a company will spend $16 billion on spectrum, build out a nationwide system that covers all of America and then wholesale the system to anyone who wants to use it for any reason and resell it at any price? I don’t get this attitude at all. Companies that take risks, spend lots of money and build out networks are entitled to make money. If this same group of people were in France, the UK or Japan, their wireless phone bills would be much higher than here in the United States. On average, we talk more than 700 minutes per customer on our wireless phones in the United States, more than twice as much as European and Asian customers. Why? Because it is so much cheaper here than there.
But we are still being ripped off, aren’t we? Let’s see. We got rid of AT&T and introduced competition and the wired companies turned into wired pipes. Prices fell, companies filed for bankruptcy and there were mergers. Now we are back to the smaller AT&T, Verizon, Sprint and a number of smaller players. There was not enough revenue to go around and all of the companies could not survive. Why? Because they became wired pipes and the economics simply did not work.
Enter the Internet where the grand life of broadband access is free and access to everything is free (NOT!). That is the perception of many and they believe in the right of free access to all. I believe those who take the risks and build the networks—no matter who they are—have the right to a fair profit. No one doubts that we need broadband for everyone, but there are ways to accomplish this other than what has been proposed here.
The claim that 700 MHz goes further and penetrates buildings and trees better than any spectrum yet to be auctioned is true and correct. Based on this, they state that nationwide networks can be built with fewer towers, less expensively, and provide broadband to everyone. Well folks, what do you do about capacity? At a given cell site, in a given cell sector, you only have so many bits per Hz available for distribution. And each cell sector is bandwidth limited, which means that the more people who use it, the less each person gets. The ONLY way to provide more bandwidth is to split cells, add more of them, add pico-cells and build out systems that cost real money, which increases backhaul costs in the process.
700 MHz is great spectrum, but wireless is the last mile (or 2 miles or 3 miles or 300 feet), and it is the high-speed connections to the cell sites that cost money every single month. Who pays these bills? Who pays for the generators for times when power is out? Who pays for the technicians, etc.?
Remember Nextwave? It bought PCS spectrum by the bushel at auction and was going to build a nationwide network based on a wholesale model. It has now taken itself out of bankruptcy, sold off its PCS holdings and is reshaping itself as a new company. Why didn’t these folks come to Nextwave’s rescue?
I guess I’m just one of those people who believe that if I get a service I have to pay for it. I don’t see anyone telling DirecTV that it has to open up its satellites to anyone who wants to wholesale TV shows, nor the satellite company that is providing two-way Internet access to those who are not served by DSL or cable. Why not ask these folks, XM and Sirrius to open up their spectrum? They didn’t even have to go to auction to get it!
People love to hate the phone company—any phone company and every phone company―but I can tell you that I will pay for reliable connections I know will be up and running when I need them, rather than bet my business on something that is not as reliable. Have you seen the articles recently about how companies that have switched to VoIP and use the Internet for voice communications are having a lot of problems with dropped calls and poor audio quality? Do any of you really think that the Internet is a five-nines reliable network? That type of network cost money and, in my book, the people who invest in it are entitled to make money!