Let's Build an Open Access Wireless NetworkTuesday, April 24, 2007
"Deja vu all over again," Yogi Berra is reported to have said. Back during the PCS auction in the mid-1990s, NextWave went after a lot of PCS spectrum and had a business model to build out a network purely as a wholesale play. MCI stepped up first, as I recall, and committed to zillions of minutes. Then there were snags, the issue of percentage of ownership and missed payments. It got really messy, ended up in court and took years to resolve. Once NextWave emerged from bankruptcy, its business model had changed and the wholesale idea went out the window.
Fast-forward a few years. I proposed that the major network operators join forces, pool some of their spectrum and build a nationwide data network they all could share. I can still hear the laughter from within some of the companies and the harsh responses from others, but I thought it was a good idea.
Now scores of people are lining up to have at it again. Let's require an open access broadband network for the good of the citizens, they say. Let's make it available for any and all who may want to wholesale minutes and bits of data across it. Let's get this network built by requiring the winning bidders for the 700-MHz spectrum to build it. Never mind that there will be hundreds of licenses up for grabs, from major metro to rural and everything in between. Stitching together a nationwide footprint at an auction this size would be a daunting and probably impossible task, even with polled license bidding.
Everyone in the world will be after this spectrum: the incumbents, those who want unfettered access for all, some Internet players and perhaps even a few members of the NAB. This is beachfront property and it will be fought over long and hard at the bidding table. This spectrum is viewed as the most valuable to ever come up for bid, primarily because distance and penetration into buildings at 700 MHz are better than anything commercial network operators have today.
While everyone is getting their bank accounts in order and forming partnerships and new companies (it won't take the press but a few minutes to see behind the curtains), let's look at what's ahead in the way of networks and services available in the United States.
Today, we have four major wireless networks, Alltel and a host of others such as Cincinnati Bell and NTelos that cover smaller areas with roaming agreements. We also have winners of the AWS spectrum including T-Mobile (one of the big four), a number of cable companies (or are they part of the big four with their joint venture with Sprint?) and other companies we have yet to hear from. Sprint is building a new 2.5-GHz WiMAX network as is Clearwire, and AT&T has some of this spectrum. NextWave, which owns quite a bit of spectrum, has not been heard from for awhile. Smaller companies such as Metro PCS and Leap are around and doing okay, and some of the MVNOs are doing well including Helios, Disney, Virgin and a few others. Then we have the Wi-Fi hotspot and muni-Wi-Fi providers. And since wireless is now about content, let's add MediaFLO and Medio, both with spectrum and networks, satellite TV companies and XM and Sirius satellite. Did I forget anyone?
Okay, on to the wired side (it's easier here). We have DSL, cable and fiber and that about does it. Except for fiber, these, for the most part, are in the ground and the costs were written off years ago.
Today, the areas of our country that are underserved by broadband are the far-out suburbs and rural areas. One reason rural network providers are so interested in the 700-MHz band is because they could build out fewer cell sites and cover more people per site, perhaps bringing the economics back in line. Rural America is not underserved because it is being ignored; it is underserved because there is no economic model to make it worth the investment to serve them. From what I have seen, I am not at all sure we will ever find an economic model that will work, but perhaps we could take lessons from other countries. I have no desire to upset rural network operators-they are doing a great job with the resources they have. The following is only meant as an example of how other countries are addressing the problem.
Japan, for example, doesn't auction its spectrum, but it does charge a yearly fee for spectrum use on a megahertz-by-megahertz basis and it charges a one-time fee for each device placed on a network. Further, a broadband license granted by the MIC (Japan's FCC) is to cover all of Japan-metro, suburban and rural. The MIC does not care if you lose money in the rural areas since you will make enough money on the metro and suburban areas to counter the loss. If you don't provide coverage to all of Japan, you forfeit your license. Perhaps we should look at something similar for our country. If you win a license for Boise, Idaho, you have to cover a certain portion of the rural area surrounding Boise; if you win a license for Pittsburgh, you have to provide coverage to the rural areas surrounding Pittsburgh. There would still be some holes, but that could be taken care of if someone examined the problem.
Perhaps there should be an agreement for the winners to share the networks with rural network operators, let them run the networks or make some other arrangement that would let them play as well. To me, this is not about letting the big guys get bigger at the expense of the little guys, it is about extending broadband coverage into areas where we don't have it today. I think the Japanese have a viable solution that is based on economics rather than the government having to step in and pay for rural coverage as in other parts of the world.
Those who believe the Internet is free and access to it should be free don't understand the economics of access. Even using a free Wi-Fi access point to get to the Internet is not free, someone is paying for it, either to attract you to their store or because they have some other reason for wanting to do so. They are paying for it by providing the backhaul connection necessary to carry the bits back and forth. Our own access at home or at the office costs money. We pay for DSL and/or cable access and, yes, many still only have dial-up or no access and that is the problem we are trying to solve. Access for all is supposedly a national initiative and is being talked about at the highest levels of government, but it is yielding little at this point.
No, access to the Internet is not free and no, access to wireless services is not free. Someone pays the bills whether it is the customer, supplier or advertiser. The fact remains that it costs money to build infrastructure and it always will. I believe the FCC should be taking a longer and harder look at the 700-MHz band for everyone-including the first responder community-and a decision should be made about how to provide broadband to rural areas of this country as well as how to make the best possible use of this new spectrum.
Of course, this won't happen. When it comes to things like this, it is more about politics and who owes whom a favor than about long-range planning. I am willing to bet that the much-reported FCC meeting this week yields little in the way of concrete advances toward an open and fair auction, relief for the first responder community or for rural America. No one will be happy with the results. We will probably have some notices of proposed rulemaking to read over and respond to, and when the comment period is over, we will have the solution of the month.
I believe we will have to live with a 700-MHz band that is made up of hundreds of licenses, different technologies, different ideas about how the band should be used and far too many players. Over time, this band will be consolidated as well. It will be integrated into other systems and networks and we will end up back where we started: four or five major network operators and neither the needs of the first responder community nor rural America will be met. These matters will have to be addressed by whoever ends up in Washington DC next.
There are many complex issues to be juggled here and no one person has all of the answers. Unfortunately, the people who could work toward a consensus are not in charge-they don't want to be in charge and no one would listen to them anyway. Again I say, "We only have one chance to get it right." The way I see it, we are about to blow that chance big time!
Andrew M. Seybold