Obama’s Wireless Plan Favors Broadband Over TV

U.S. President Barack Obama unveiled his plan Thursday to provide 4G wireless broadband coverage to 98 percent of Americans as he promised last month in his State of the Union Speech. The plan is a hodge-podge of programs and will cost $18.2 billion, but the president believes that a new spectrum auction will generate enough to cover the costs and even provide a little extra to help reduce the national budget deficit. However, this “win-win” situation depends both on Congress passing a law to approve a new type of spectrum auction, and on TV broadcasters giving up their airwaves to serve mobile broadband. For those in Silicon Valley, the plan also includes a $3 billion innovation fund for improved wireless technologies.

I Want My MTV

The core of the plan is spectrum: how to get more of it from parties that currently have it and how to auction it off to parties that can use it for mobile broadband. The National Broadband Plan calls for 500 MHZ of total spectrum with about 120 MHz of that coming from the nation’s television broadcasters. To make this happen, the FCC needs a carrot and stick. The stick is the growing fear that the nation is running out of spectrum, a statement sources in the FCC admit is a bit silly today, but could be a real threat in five to seven years. The carrot is something called an incentive auction by which Congress will lure broadcasters into relinquishing some of their 6MHz of spectrum to the highest bidder while sharing in the revenue generated by the auction.

I’ve been skeptical of this plan, since everyone knows spectrum is valuable and broadcasters don’t want to give it up, especially those in large, urban markets where the need for airwaves is highest. Broadcasters are also working to use the spectrum for their own mobile television service that delivers broadcast TV to devices that have a special kind of chip to receive it. It’s a dubious service offering, and may simply be a feint to boost the value of the spectrum so mobile operators don’t get it, or have to pay even more for it. However, a source at the FCC says the agency is confident that enough broadcasters, even in urban areas, would be willing to give up their airwaves if paid to do so. He pointed to stations in the bottom tier in big markets and said they likely aren’t making a profit, so the decision to take a big check for a portion of their airwaves is an easy one to make.

However, the same source and several analysts admit this whole plan hinges on legislation to allow incentive auctions to pass Congress, something my source and analysts believe is only about a 50-50 chance right now. If it passes, and the auction proceeds in a few years (and it will take years), the administration is betting the auction generates $27.8 billion in proceeds for the government. No one will share what the government believes the windfall for broadcasters might be. Expect opponents outside the broadcast industry to whine that broadcasters never paid for the spectrum they use, and so giving them billions to give it up is robbing American taxpayers. Arguing for some kind of eminent domain for spectrum will only make this process less likely, though.

Money, It’s a Gas

From the expected $27.8 billion, the administration wants to fork over $9.6 billion to reduce the deficit and $3 billion to create a Wireless Innovation fund (WIN). Details on who would administer this fund and who would have access to the money are scarce, but $500 million of it would go toward innovations to help with the deployment of a national public safety network. A whopping $10.2 billion would go to the creation of a nationwide public safety network for first responders. The remaining $5 billion would act as a one-time jumpstart for boosting wireless coverage in rural areas to move from 95 percent of the country having 3G access to getting 98 percent of the country 4G access. The $5 billion would be managed by the FCC and would help reach the 98 percent coverage goal for Americans within the next five years.

The Safety Dance

The final pillar of the plan is the apportioning of 10 MHz of spectrum for public safety, which, more than a decade after 9-11, will get first responders on a nationwide network where they can all communicate using the same gear. For the deep details of the public safety component, read this article at the Washington Post (s wpo). The short details are that the program is a triumph of politics over common sense. Public safety agencies will end up spending a lot more on their radios and equipment because the spectrum they will use won’t be shared with another wireless company and its subscribers, so first responders won’t get the economies of scale associated with buying handsets that could also be sold to consumers. But those firemen and police will get their own block of pristine spectrum that no one else will play in. Plus, Verizon (s vz) and AT&T (s t) won’t have to worry about another commercial carrier trying to offer service in a block of 700 MHz.

The public safety tab under this plan break out as $3.2 billion to reallocate the “D Block” of spectrum set aside for public safety; $7 billion to support the deployment of this network; and $500 million from the WIN fund.

You Gotta Have Faith

Is this plan a winner? The administration, faced with an intractable competition problem on the wireline side, thinks this is the way to deliver competitive broadband access to millions of Americans. Blair Levin, the author of the National Broadband Plan told me on Monday in a debate, that without wireless in the mix as a viable competitor, the cost of providing broadband to 98 percent of Americans (currently measured as 4 Mbps down and 1 Mbps up) would double. I said then and still think today, that wireless broadband, because of its cost, lack of network neutrality rules and its speed constraints isn’t really an acceptable broadband option in place of wireline. Of course, wireline coverage is expensive and compromises aren’t really win-win situations. In five years, when the rest of the U.S. is using 100 Mbps connections that cost about as much as a 5 Mbps down wireless connection with a smaller data cap, I’m sure rural consumers will feel that they lost.

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