Commentary — Misplaced responsibility for financial turmoil
Along with being a lawyer/journalist/pain in various body parts, I have enjoyed a rather extensive background in marketing. It is with this perspective that I wince each time I see the words “market based” approach to spectrum management. This bastardizing of a fine concept of providing a service or product that has been shown to meet the demand of a target market, is being used time and again as though it means the same as providing licenses to those persons who cannot and will not demonstrate any greater evidence of consumer demand than a quantity of invested or borrowed dollars to be spent at an FCC-sponsored auction. That isn’t market-based spectrum management, unless one is speaking only to the market for spectrum (aka business licenses).
About 20 years ago, if a company had an idea to provide a new telecommunications service, that company would file a rulemaking petition and within its proposal, would set forth the reasons why it believed that the public’s allocation of scarce spectrum would be rewarded by the introduction of new services. Commenters would, among other things, voice agreement or disagreement regarding whether the proposing entity had done its homework, e.g., did the evidence truly show that a market existed and would the service pay for itself within a reasonable time frame?
Those days have passed, and we are stuck on the hamster-powered exercise wheel of logic that passes for comprehensive spectrum management, which measures the efficiency and logic of a proposal by the number of dollars that corporations are willing to spill into the U.S. Treasury in support of any idea that has the word “broadband” in it. This eschewing of responsibility greater than collection of receipts has created a secondary market for spectrum, called debt financing.
But as we see, the financial markets are as capricious as the FCC, and each will insist on making good on their investment, regardless of what the corporation intended. The FCC will want to be paid. The bank wants to be paid. The FCC sometimes grants extensions for construction. And the bank will sometimes extend the time in which one must repay the loan. And the money, all of it, is supposed to come from the innovation that the corporation devised, which innovation has not been vetted by comments, engineers, market analysts or affected groups, appearing before an agency of government that is to be a neutral arbiter of whether the proposed service will serve an identified need and substantial demand by the public. To use the parlance of Wall Street, inadequate due diligence has been performed prior to the commitment of billions of investor dollars.
This failure to perform due diligence results in an overheated investment community fueled by unrealistic expectations that do not comport with financial data supported by consumer demand. Ultimately, the bubble bursts in ferocious ways that diminish the value of investments, leaves progress stranded, and sets back the timetable for conservative, intelligent growth. Or, as I stated years ago in a White Paper to NTIA and the SEC, a “Day of Reckoning” occurs which sends stock prices spiraling downward. Or as we used to say, eventually somebody calls for the check.
I consider it a misplacement of responsibility that while thousands of investors are losing their shirts, the FCC has not recognized its responsibility in this problem. I’m not looking for mea culpas or even a simple apology. What I would much prefer is a shift back to the time when the agency was far more judicious with where it spent our spectrum, and to whom it gave it, and why.
(Editor’s note: Contrary to the automatic copyright notice that appears below, this article has not been copyrighted by PRIMEDIA Business Magazines & Media Inc. It has been edited from its original form in the Web-based Private Wireless Forum.)