Tuesday, December 20, 2011

Too Big to Fail Wireless Carriers

   
           Few would dispute that spectrum has played a key role in making it possible for AT&T and Verizon to acquire scale economies. These carriers, their trade association and sponsored researchers are very adept at reminding us how scale can translate into a win/win situation for the carrier and its consumers.  I readily acknowledge that if you have a super-size demand for wireless service, U.S. wireless carriers can offer you the lowest per unit rates in the world.  Of course this all you can eat pricing model does not apply to data of course which now has caps to prevent spectrum hogging. 

            But there is a down side: in their quest for scale, the big two carriers can make ever stronger arguments that they are too big to fair with failure defined as not having enough spectrum to satisfy demand the carriers stimulated.  So even if AT&T did not have the spectrum, tower sites and switching capability to handle all the I-phone data traffic in some locations, it’s the FCC’s fault that AT&T did not have enough spectrum to satisfy demand.

            So with the demise of the AT&T acquisition of T-Mobile expect to hear AT&T continue to whine about a spectrum failure.  And expect the FCC to accommodate the big two wireless carriers’ spectrum need even if in doing so the Commission contributes to further market consolidation.

            I wonder what might have happened if the FCC had retained a spectrum cap.  Might more carriers—and even specialized carriers—have entered the marketplace?  How about the prospect of a data only carrier with less total spectrum available to it, but more spectrum allocated for data service?  The U.K. opted to reserve new spectrum for market entrants. 

            It will interesting to see whether in the United Kingdom too big to fail major carriers whine, or have to compete more vigorously as a result.

1 comment:

Steve Crowley said...

If I'm a big U.S. carrier, I'd like the option of spectrum to increase capacity, but I would have any network engineers I had not yet laid off look at other, more elegant approaches.

If I may, I link to a recent blog post of mine. Refer in particular to the section "Invalid Assumption #2." There, I point to the hopelessness of trying to get significant capacity increases by spectrum alone. Again, I still might want spectrum for various reasons.

http://stevencrowley.com/2011/11/19/three-invalid-assumptions-that-make-the-fcc%E2%80%99s-spectrum-requirements-model-skew-high/#more-2294

I suppose the 120 MHz targeted from the incentive spectrum auctions might be used for new competitors.