Demand for high speed mobile data applications is strong enough to support ballooning cellular bills, and strong enough for carriers to hobble subscribers who take “unlimited data” seriously. A cure for high prices and churlish carrier behavior is more spectrum, but that has been elusive.
Consumers used to exchange physical copies of their favorite photos, but we print photos far less often than we used to. Instead the many with smartphones and tablet computers exchange photos and videos over carriers’ 3G and 4G bandwidth. The exchange of visuals adds to the “data” transferred on the consumer’s account. “Data” is almost pure profit for the carrier – until the carrier faces spectrum exhaustion, where capital expenditure cures can bankrupt a carrier.
AT&T sought new subscribers at premium margins and prices (the “unlimited data” carrot), while trying to secure more spectrum before it loses its reputation for quality service. That balancing act failed. AT&T has announced that customers using 3 gigabytes of “unlimited data” volume will have their data speed choked back. That plan might pass legal review, but it is a screeching failure for many customers. AT&T doesn’t have good alternatives – it needs spectrum but there’s none at hand.
There is no well-functioning spectrum market. Instead it’s always a multi-billion-dollar convulsive rulemaking. AT&T tried to buy T-Mobile in 2011 so it could repurpose the spectrum to 4G, but the FCC nixed the deal. AT&T considered a Dish Satellite buy to repurpose Dish’s terrestrial spectrum. The FCC denied Dish’s plan to build out cellular service on its terrestrial spectrum, instead of on terrestrial and satellite spectrum. This denial likely breaks any Dish plans that AT&T had in mind.
Verizon (with spectrum in reserve) negotiated a spectrum buy from cable companies. But, T-Mobile objected and filed its complaint with the FCC. That can keep Verizon’s cable spectrum deal running up attorney billable hours for a decade. Sprint had planned to acquire MetroPCS for extra subscribers and spectrum, but Sprint’s board backed away, evidently due to financial issues. So, four recent spectrum deals have failed to proceed in an orderly way.
Suddenly, legislation has instructed the FCC to auction spectrum used by some TV stations. It’s an old idea with glacial progress ahead. It can take a decade to clear the spectrum (move the TV stations), invent use restrictions (give spectrum to favored constituents at lower prices), conduct the auction, and settle the post-auction drama (handle the formal complaints, defend FCC actions in court). More likely, “TV spectrum” will become an argument for denying progress toward usable spectrum soon, and consumers will feel the squeeze.
Alan Daley is a retired businessman living in Colorado. He follows public policy from the consumer’s perspective.