Bustin’ a cap on antitrust laws

Today, we speak of “caps” — not the type you put on your pickup nor the kind starlets put on their teeth. We aren’t talking about the ones that pop in toy guns or the ones that sit on your head. This is about spectrum caps — that accessory that keeps the largest carriers warm all winter and in hot pursuit of legislative relief.

At about the time that the FCC was getting ready to auction the wideband PCS spectrum (1997), the agency realized that it was auctioning off the widest bandwidth it had attempted to market to date: 30MHz. The FCC, which occasionally has a flash of understanding, decided that for the auction to work and for there to be a semblance of competition in the market, it would have to knit a spectrum cap. In essence, the agency said that no one carrier could be licensed for more than 45MHz within a market. Said another way, it “capped” the amount of spectrum a company could have in each market.

That meant that no one carrier would hold two wideband PCS licenses (30 + 30 = a bareheaded violation). It also meant that cellular carriers could become PCS carriers, but not easily, without eating up a whole lot of room under the cap. The largest carriers now do business in a way that is akin to the NBA or the NFL: They pick players (services) they want to bring to each market while still staying under the cap.

When the spectrum cap was announced, the biggest entities didn’t kick too much. After all, they were trying to figure out what the heck they were going to do with the 30MHz- and 10MHz-wide licenses they were getting in the PCS auction. That “billions-of-dollars thing” was also involved in paying for the spectrum received. Add that to their technology tussles, build-out requirements, financing efforts, stock sales (with new IPOs just for their wireless businesses), the mega-mergers (and sprinkle in a presidential election) and, well …. Those big entities were just pretty doggone busy.

But underlying all of this activity was a new energy: the search for the “killer application” that would drive the American public to the wireless revolution like well-heeled lemmings. The savior of the industry would be 3G: the killer technology that would make all of the billions of dollars spent on spectrum purchases and build-outs seem like pennies once the dough started rolling in.

I find 3G to be a mystery. It may stand for third-generation wireless, but the effect it seems to have on everything other than the financial markets reminds me more of Y2K. After doing considerable research in this area (which involved actually asking at least four people to specifically define 3G), and after reading a bunch of old magazines and newer textbooks, I discovered that 3G means bundling every known communications service and providing it via the ether.

Telephony, which remains the mainstay of the wireless revolution, would be joined with streaming video, mobile data, AVL and GPS, video conferencing, televison, broadcast radio, stock quotes and e- (or m-) commerce. The only thing the device wouldn’t do is get rid of your mother-in-law (killer app, my eye).

Still with me? You might notice that 3G involves consolidation of services via a consolidation of spectrum use. Stated another way, it’s mega-monopoly building, using technology, rather than economy, as the excuse for creating ever-larger entities to finance the build-out of these dream systems. Either singularly or by consortia, the largest entities would construct systems to combine the offerings of several wireless carriers into one bundled group for marketing to the public.

But this obvious byproduct of 3G musings seems to be getting missed in the discussion. CTIA, and other apologists for the monopolists, declare that America needs 3G, the public demands 3G, and our members want to deliver 3G. Of course they do. It eviscerates every antitrust law known to man in the name of gadgetry.

Those who are technically minded (which would be everyone but me and my dog, Molly) might try to visualize a device to deliver all of these proposed services. You might also try to envision the power requirements of that device. That’s right, it’s a laptop computer hooked to an AC Delco battery with a back-up solar generator.

But I digress. The dream of 3G and the wonders it might do for the stock of the largest carriers is driving the renewed discussion on spectrum caps. It seems that all of the services to be delivered in a 3G world cannot be delivered within a mere 45MHz of spectrum. Requirement estimates vary between “100MHz” and “Everybody but us, just get the heck off.” So, although in the last four years the FCC has managed to auction, mass-license, and otherwise make available more spectrum than in the previous 63 years, the 3G guys want more — and they want it now.

But there’s this 45MHz cap in place, and the biggest carriers are trying to shake it off their heads. They will do it. The current administration is not likely to stand in the way of alleged progress, and Chairman Powell does not have a history of making life hard for the biggest players. He and the new commissioners, in the name of free-market economics, will either lift the cap or eliminate it entirely.

All of this political and economic wrangling is the prelude to the 700MHz auction that keeps getting pushed back. The scheduled migration of analog television to its new digitized spectrum is opening up opportunities for delivering services on vacated broadcast channels. The 3G guys do not want to miss the opportunity to exploit this spectrum just because of some silly cap. The headgear has got to go.

Consider that if the cap stays in place, all of the winners in the PCS auction will be ineligible to bid in the 700MHz auction. Now, if you are the federal government’s toll-taker, you don’t want to leave out the deepest pockets when you “sell” this valuable piece of spectrum real estate. So, there will be a decided advantage to the feds in lifting the cap. They take a bow for promoting free enterprise while making sure that future advanced opportunities are anything but free.

I checked the morning paper and found out that there was a homicide in DC last night. Seems some homey busted a cap on one of his peeps, reducing the competition in his posse and makin’ sure that he got his props by this killer app. Word, bro’. Wall Street and 10th Street, S.E., got it goin’ on.

Schwaninger, MRT’s regulatory consultant, is the principal in the law firm of Schwaninger & Associates, Washington, which is counsel to Small Business in Telecommunications. Schwaninger is also a member of the Radio Club of America.