Wheeler Spectrum Screen Seen Likely to Land in FCC Crosshairs
The FCC is likely to address its current spectrum screen, especially in light of T-Mobile’s proposed buy of Sprint, some industry officials said. But a move to change the screen could face a backlash, particularly because of the pending wireless deal, they said. The screen was last updated in a June 2014 order under then-Chairman Tom Wheeler and uses a one-third criterion in all bands then considered suitable for mobile broadband deployment. It includes an enhanced screen below 1 GHz because of the “distinct propagation advantages” of low-band spectrum. Commissioners Ajit Pai and Mike O’Rielly dissented then, citing concerns about the enhanced screen (see 1405160059).
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The bands the FCC includes in its current screen are 600 MHz, 700 MHz, 14 MHz of specialized mobile radio spectrum, cellular, PCS, AWS, the wireless communication service and 156.5 MHz of the broadband radio service and educational broadband service band. Former officials said the notion low-band spectrum is more valuable was blown out of the water by the high prices in the AWS-3 auction of mid-band spectrum.
“The screen was always intended to evolve over time to reflect new bands and changing technical and economic conditions,” said Fred Campbell, director of Tech Knowledge. “The FCC’s efforts to make additional mobile spectrum available, the development of 5G standards and the increasing importance of small cells are factors that suggest it's an appropriate time to evaluate the screen.”
“The FCC's spectrum screen analysis has always seemed ad hoc,” said Brent Skorup of the Mercatus Center. “I hope FCC review of spectrum transfers will look primarily at anticipated competitive effects and rely less on a poor proxy like spectrum holdings.”
A former spectrum official differed, saying Pai may be reluctant to move on the screen now because of the pending wireless deal. Pai is already “taking a beating” on Sinclair's proposed buy of Tribune (see 1805090075) and faced a storm during the December rescission of net neutrality rules (see 1805090065), the former official said. The FCC didn't comment. The FCC uses the spectrum screen as it evaluates transactions. Holdings above the screen get additional scrutiny.
Since then-Chairman Michael Powell first eliminated the spectrum cap in favor of a screen, “the unfortunate history has been to rush to relax the screen every time we have expanded the available spectrum on the theory that new spectrum means new competitors,” said Harold Feld, senior vice president at Public Knowledge. “Predictably, what actually happens is that the existing providers buy up all the new spectrum and leave nothing for competitors.” Given consolidation “we ought to make sure we get some additional competitors established, and make sure that the existing competitors remain viable, before relaxing the screen,” Feld said. “Absent some sort of spectrum screen/cap, we can expect the dominant providers to win enough spectrum to maintain their dominance.”
“What better or more pressing time could there be to examine the level of competition and concentration in the space than when two of the biggest four players want to kill off competition and ratchet up that concentration level even more?” asked Free Press Policy Director Matt Wood. T-Mobile/Sprint "would raise prices," he said on "everyone who's benefited till now from those two carriers efforts -- both competing against each other and against Verizon and AT&T's duopoly at the top-end of the market."
Others hope the FCC will get rid of the cap entirely or at least address the 2014 screen.
The spectrum screen “is little more than a smoke screen,” said Larry Downes, senior fellow at the Georgetown Center for Business and Public Policy. “It has been frequently manipulated without explanation, seemingly to allow the FCC to reach a predetermined outcome on a proposed license transfer. Bands are included or excluded largely by whim, sometimes applying different rules in different markets to the same bands. There is no set method for revising the screen, and revisions are often made after the parties have negotiated a transfer but before the agency completes its review.”
There was never any “statistical or economic justification” behind the assumption that one-third of the spectrum in a market in any way correlates with the competitiveness of a market, Downes said. The better alternative is getting rid of the screen “in favor of actual analysis of market dynamics in any particular proposed transaction,” he said. “The FCC has the data to perform such analysis.”
The 2014 order was an improvement over the previous screen but “not by much,” said Geoffrey Manne, executive director of the International Center for Law & Economics. Manne said a screen is by its nature problematic. “Do away with the screen, cap, and reliance on the [Herfindahl-Hirschman index (HHI)] calculation altogether, and place the burden on the agency to demonstrate likely harm to consumers before imposing limits on license transfers under the ‘public interest’ balancing test,” Manne told us. “There is no intelligible or articulated basis for the precise triggers they employ; and their unpredictable application and politicized interpretation lead to significant and costly regulatory uncertainty.” HHI measures market concentration.
Meanwhile, FCC officials confirmed that T-Mobile CEO John Legere and Sprint CEO Marcelo Claure met with Pai and Commissioner Brendan Carr Tuesday and Commissioners O’Rielly and Jessica Rosenworcel last week as the CEOs make their case for the deal.