Why The Big Fuss Over AWS-3?Tuesday, December 23, 2008
I have a Google alert set for AWS-3 articles and I have been receiving about ten alerts a day. It seems as though the AWS-3 spectrum and its “free wireless Internet” for all is stirring up a storm. There are some who oppose auctioning this spectrum with the restrictions the FCC wants to place on it (25% of the bandwidth to be used for free, 95% of the U.S. population covered, and porn free) and this camp is divided into two groups. One believes that the AWS-3 spectrum, as laid out by the FCC, will cause interference to network operators that are building out AWS-1 spectrum. The other believes auctioning the spectrum with these restrictions is paramount to handing it over to M2Z, the start-up that, along with the FCC, hatched the idea of nationwide broadband being built by a single operator. This camp is made up of the current administration, many members of congress who object to the restrictions, and T-Mobile and other operators concerned about interference.
The other camp that is yelling loudly, or perhaps loudest, is of course headed by M2Z, a few members of the House of Representatives who believe the FCC is breaking the law by not allocating this spectrum before the end of the year, and many, many individuals and Internet companies that believe open access to the Internet via a wireless network also means free access. If you read any of the blogs or articles about those who oppose this spectrum being auctioned that permit comments (including mine in Fierce Wireless), you will see a lot of comments from people who attack the authors because we are trying to deny them their right to free wireless access.
The rationale that is commonly used for free access for a nationwide wireless Internet is that the Internet itself is free, and our road system in the United States is free, therefore, like our Internet and roads, wireless Internet should be free and those charging us for wireless broadband access are holding us up.
Okay, first let’s debunk the myth that the Internet is free. If you have DSL, cable, or fiber access to the Internet, you pay for that access and, in most cases, you pay a tiered rate depending on the data speed you choose. If you use a Wi-Fi access point on campus or at a café where access is free, you are not paying for access, but the university or café owner is. If you use a for-pay Wi-Fi access point, you are paying for access to the Internet.
Once you pay to get on the Internet, you can visit most websites for free. Websites make money when you read ads or buy something from them, but the website owner is also paying for access to the Internet so you can get to its site.
On to our road system, which is far from free! First you have to pay for a car or other vehicle, or pay to get on a bus. If you have a car, you pay vehicle registration every year, pay for insurance for the car, and for repairs. During the year, you buy gas and pay state and federal taxes on that gas and that money is used to maintain existing roads and build more, and a portion of what you pay in state and federal income taxes is also used to support our road system. So using the roads in the United States is NOT free. Oh, if you live in New York, New Jersey, Illinois, Texas, Florida and many other places and you want to use Interstates, turnpikes, and other roads, you pay a toll each time you use them, just as you do when you cross a bridge or drive through a tunnel.
Once you are on the road or highway, you can travel on the road until you get to where you are going and you can usually go inside a store for free, perhaps you will purchase something. The roads and the stores along them are no different from the Internet and the websites on it. In both cases, you pay for access to the roadway, one made of asphalt and one made of wires, fiber, and microwave.
How can anyone use the argument that the Internet itself is free and our road system in the United States is free to “prove” access to broadband services should be free? If I live in rural America and use the roads, I pay for them. If I live in a city, have a car, and use the roads, I pay for them. If I ride a bus, I pay the fare. Why would I think I should not have to pay for access to the Internet? If I am using wireless access, why would I think I should not have to pay a premium for that access, just as I do for wireless voice services? Unfortunately, I doubt any of these arguments will sway those who try to use these examples to prove the point that our access to the Internet (wireless) should free.
The real issue is how we make access free for those who have access available today but cannot afford to pay for it? How do we make access available where there is none and there is no economic model to support it? These are the real issues—not providing free Internet to everyone.
Let’s Get Real about AWS-3
Let’s suppose the auction takes place, M2Z wins the bid, pays its money to the FCC, and sets about building out the network. The price tag on this network is said to be $5-7 billion. There is no way in the world anyone can build a network at 2.1 GHz that covers 95% of the U.S. population for that kind of money. My estimates, based on having to deploy 85,000 cell sites, are that the ten-year capex and opex costs will easily come to more than $40 billion. Estimates are all over the map, so if we split the difference for the sake of argument, the network cost would be about $20 billion.
M2Z will have ten years to build the network to 95% coverage. Does anyone really think it will start with rural America where the number of potential customers won’t pay for the cost of the network? No, it will start in urban areas where it will be competing against wired, cable, fiber, and four or five wireless broadband players at least. Even if M2Z builds out metro areas, it will have to land some paying customers and/or put advertising on the “free” portion of the network, but this free part of the network will most likely be used by those who cannot afford to subscribe to another form of broadband, so how much do you think advertisers be willing to pay for those eyeballs?
How will the AWS-3 network be able to compete against Clearwire, three or four existing wireless broadband suppliers, cable, wired DSL, and perhaps fiber access? How will it compete against the new TV white space that is unlicensed so anyone can use it to provide broadband services to anyone else? Exactly how many broadband systems can one area support?
Ten years from now, if the network is actually built, 95% of the U.S. population will have access to free 786-Kbps downlink speeds (no one has mentioned uplink speed), which then, will be like having dial-up Internet access today. According to Google, 40% of today’s Internet traffic is already video. How much of it will be video in five, eight, or ten years? Why would anyone build a network that will take ten years and billions of dollars to provide data speeds that won’t even be considered as broadband by then? Where is the payback?
Some Final Thoughts
Why do the government and the Internet community think one single network to cover the entire United States is the answer to broadband for everyone? If the object is to provide broadband to those who cannot afford it as well as to those who have no access to it, then there are many different ways to do this and none of them require yet another wireless network that may or may not be built before the venture runs out of money.
I know this posting will not have much of an effect on those who believe the AWS-3 network will, once and for all, solve this nation’s broadband problem—if there is a problem at all. Today, more than 72.5% of the U.S. population has access to the Internet, and since 2000, Internet access has grown by 131% in the United States. That leaves one-third of our population without access or without being able to afford access. Why cover 95% of the population with a single network to include 33% of the population?
It would make more sense to concentrate our resources and our efforts on providing access to the 33% who have no access, rather than give those who have multiple types of access yet another network choice. By using our resources more wisely, we can extend access to those who do not have it a lot quicker than ten years down the road and at far faster data speeds than what is proposed.
For more on this topic, watch for my White Paper on Nationwide Broadband that will be available on our website right after the first of the year.
Andrew M. Seybold