Shut down TV, to open up mobiles – the auction 73
It’s over.
Analog US tellyvisions are being thrown away, liberating long-desired spectrum that calls for reallocation, today.
Chicken or egg, we need air, so let there be plans, people & co, actions and an auction to start with, auction 73 for the 700Mhz spectrum. Rounds last 10minutes to set an equilibrium position among the different degrees on openness of the mobile industry. Tough.
The auction house is the Federal Communications Commission and the most desired item on the catalogue is the “C Block”, a fine 22Mhz segment assorted with the capacity of enabling deployment of national scale projects to its collectors: nationals and locals, operators and WISPs, new business people, some opportunists and an artist (Office of Spectral Ecology)
The majority of big Mobile Network Operators (aka MNOs) have shown up only to be shown the door out during the prequalification phase, in a sort of witty joke or creative telco analysis challenge.
As today was approaching, no more jokes, FCC doubled the panel of qualified bidders to reach 214, re-including the MNOs, who can reconsider themselves as “home”. (AllTel, AT&T Mobility Spectrum, Chevron, Qualcomm, Verizon Wireless)
On the “guests” side I was delighted to find the haute couture of creative business modelists. (Google, Spectrum, LLC/ Bend Cable Communications and other Sillicon Valley based companies)
buzz abouts
If you hate theories and concepts skip next paragraph and just suppose the iPhone being created by Banana Ltd instead of Apple. And then imagine it, because you couldn’t be holding it right now: AT&T or Orange don’t partner with Bananas, they milkshake and invite Banana’s to participate. The fuzz is Bananas laying on the street to claim their right to please consumers (ideally).
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buzz abouts
Apparently “homes” seek simply to preserve their status: their prescription power over mobile phone manufacturers, over content management, their regulatory influence…
On the other hand, runner-ups are challenged to prove that they can enter the supply chain and change it, having pretty good chances to do so: they have already marked a point, with Google resisting AT&T’s bullying ( !!“put up or shut up” !!) and lobbying the way into:
- Open devices: through the “Wireless Carterphone” condition, which stops bullying against manufacturers.
- Open services: through non discriminatory wholesale network access conditions
So the Googlephone might be on his way! (hurray!) along with long desired network neutrality, openness, disconcentration, innovation and regulatory repositioning. In simple words when mobile networks are neutral and open to all technologic standards and functionalities, ideas can find their way easily, and parental controls have less role to play. Tim Wu explains so well the environment of neutral networks in “Wireless Carterphone” that he even bothers to post a real picture from the 60’s version, along with his excellent insights.
Flip TI
I want to flip it: using my mobile I want to talk for peanuts, to access any site on internet, command my computer, camera and coffee machine and do whatever engineers are amused implementing to amuse me. As a professional I want the evolution mechanism to function again, cleaning up the confused telcos environment. It feels strange to complain about traffic on my way to work and when I am there just smile awkwardly in front of bottlenecks that squize ideas, and set up useless and expensive jobs.
I search no solution, it seems that exists already in network neutrality but until now our problem in the mobile industry was ignored and thus not treated. On predictions I am sure you have some great ideas to share, please do…
What intrigues me and made me torture you with this auction is NOW, 
what is happening and HOW it is happening.
Method: Let me first express some sympathy for the “guests” as they have to play in a tough procedure that mostly reflects the MNOs structure. The Auction Method (73) puts utmost pressure on buyers, forces them give up any sense of negotiation, pumps up prices and favors existing capital value over project potential value.
Principles: Price should not be the only criterion, it could be rude (and silly) to ignore deployment projects and profitability potential.
Timing: Since the long-term objective is market stabilization and consumer centric profitability these values could apply early. Sooner or later consumers will finally decide if they like MNOs choosing content for them or they’d rather put up with libertine spam while producing and distributing their own.
So how could it be sooner? How can we implicate this market feedback on this starting point? How a weighted voting system could apply? Can we group people that compose the market by expertise, consumerism, technology awareness, implication will and make a mature decision on airwaves ?
And funding? Come on, it’s simple, funding could be tailored to winner’s logic and the associated business model:
If it is for MNO’s the supply chain can stay as is: Winner pays now and consumers pay later.
If it is for alternatives, funding gets creative as well: Consumers can be taxed now and being rewarded later with free/gratos/tzamba mobile products, funded by advertising and paraphernalia the other way up.
Fair enough?
Related posts:
Tags: 700Mhz, Auction 73, FCC, Google, MNO, mobile, network neutrality, spectrum, wifi, wimax, wireless, wireless carterphone
As an economist, I have some faith in auctions. The problem with beauty contests (where other criteria is considered) is that they did not really work for example with 3G in Finland. (Well, neither did auctions, f.e. in Germany).
In my opinion, mobile network grid should be owned by a government entity (or near-governmental), which would sell bandwidth on it. (Similar to electrical grids in the Nordics). There is not point that each operator builds cell towers next to their competitors. The amount of capital wasted in is insane. This way we could also avoid the threat that some huge company can out-bid others on the spectrum and still decide not to do anything with it.
Georgia, if you keep writing like this, you’ll eventually make me fall of my chair, laughing.
” AT&T or Orange don’t partner with Bananas, they milkshake and invite Banana’s to participate. ” Love it!
@Kari – political auctions are not the same as commercial ones. There’s always things happening under the table that will affect the outcome.
Regarding “mobile network grid should be owned by a government entity.” Totally incompatible with the Anglosaxon-system. Why do you think they value guns so much? To shoot their politicians…
Back @Georgia: As for what is I guess your idealistic scenario, starting from “HOW it is happening.” I think ‘winner’s logic’ will certainly apply to the business-model, and find it hard to imagine that other variables will not play part in the decision by the FCC. I think that governance (a group of specialists making good decisions) will depend mostly on the company that wins the auction. I see Google doing this, and not AT&T.
Lastly, what is the relevance of the 700mhz frequency? I know that the Telco’s are working on the 2,5ghz bandwidth , which seems much more valuable for data-transfer, so how important is 700mhz and what can it be used for?
Kari thanx for the examples, link me forward please!
Timing is my favourite axe (that’s why I emphasized on early feedback from consumers): if we set priority on price let us at least think about a more frequently updated system (less scrutiny). The energy stock market model maybe?
You’re very right when you mention that public organisms should deal with administration here, since air is a public good. If we tempt to unset priority on price, beauty contests could help to avoid side effects that come from life term public post occupation, if the evaluation committees are on a per project basis (frequent updates again!). Normally per project staff costs less, no? I was thinking something like a segmented referendum.
Vincent (if you’re back on your seat…sorry didn’t mean, well) your link on popular mechanics says it all:
700MHz is not the best solution for mobile data transmission, but it is ok, plus it is a Trojan horse for new entrants that did not have much choice since the range 2-3Ghz is reserved.
Once they have their part on the 700Mhz, they can either deploy on this (attention low efficiency) and profit by the economies on infrastructure (less antennas to cover longer distances) or trade their stake with another on the 2-3 Ghz range. Kari mentioned already that unused space exists but it is blocked by the MNOs.
‘Chicken or Egg” refers to that I don’t have it clear which way the issue spectrum reallocation was brought up.
Vincent, I think that auctions are always the same and I am not a nihilist that sells her toes to kidnappers for a living
OK, thanks for clarifying that. However, I am still not 100% sure of the technical value of the 700mhz bandwidth for data. The popular mechanics article mentions that while it has a greater reach, it is much better for voice, and that whatever frequency-share is bought up can be used as collateral for uptrading, as you say. Generally though, it seems like a faux-revolution to me. Lot’s of noise, but it’s not like what is being opened up is that life-changing (à la what you wrote after “Flip TI” in your article). For instance, it makes little business-sense for MNO’s to let go of their elite 3G bandwidth.
About (my) nihilism (which is mainly aimed at social institutions, not people), well that’s a discussion for another day.
Vincent, what you say is quite logical. Much ado about little added technical value. So bidders should be after another asset.
I am not sure about the Office Of Spectral Ecology but
“Data Use” =Google I suppose. They don’t seem to have an option on qualifying the technical aspect of this and decide if it’s appropriate enough.
Air is rare (suffocate), it has been for several years that the issue of liberating the band 500Mhz -800Mhz has been discussed. Now that 60Mhz between 700 –Mhz and 800+ Mhz are being liberated, the whole procedure takes 10years. Can Google wait another 10 (minimum) to enter the market?
Why the C Block?
Through elimination, A and B blocks provide local licences (almost 1000) which prohibits nationwide projects. For the same reason, they provide less negotiation power.
C,D blocks are made up by 12,1 licences respectively both giving the possibility to provide nationwide coverage.
Plus its only for the C Block that Google gained the 2 open access conditions – a right that will be lost if a second round is necessary.
So they must have already paid a quite harsh subscription fee, they won’t just give up.
The same for MNOs, I am not saying that they are moving out from their penthouses on 2-3G but they must be vigilant what neighbours they have.
On Flip TI : I hope that if there are new entrants in the industry, MNOs will be shaken to adapt to the new environment, with the industry eventually evolving. With no R ahead of evolution.I was tempted to propose a more flexible evaluation and funding mechanism so as to adapt to every challenger, again to enable the evolution mechanism speed up a bit. I do believe that opening up the mobile industry will help it advance in the rhythm that internet does plus it will permit long anticipated synergies between the two.
Georgia, unfortunately I don’t have any specific links for my examples.
As for suitability of the 700MHz range, in Finland the 450MHz (formerly used by NMT) band was recently taken back to use as “broadband” internet access (“wireless internet available everywhere”). Even 450MHz should be enough for 1 Mbps connections. Here, the network is controlled by a company that leases the bandwidth to several ISPs. It’s not that cheap, but relatively cost-effective if you need connectivity for your summer cottage.
As for nihilists, I can only say that Big Lebowski is a great movie, btw. =)
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