The first detailed comments by new FCC chairman Tom Wheeler did not bring any surprises, but did hint at something of a chance of emphasis, towards lighter touch regulation and a heavy focus on promoting competition. His predecessor Julius Genachowski took office in the whirlwind early days of the financial meltdown, when heavier state intervention was temporarily acceptable in the US, but Wheeler begins his tenure in a time of modest recovery, but also of rising concern about the concentration of telecoms power in the hands of the big two. On Genachowski’s watch, efforts to encourage new entrants, notably the LightSquared affair, ended in failure, while a succession of mergers and acquisitions removed midsized players like MetroPCS and Leap (but not, famously, T-Mobile) from the scene. Wheeler has many challenges, but his stress on competition certainly reflects the new times.
He wrote in a blog post on the FCC website: “During my confirmation hearing I described myself as ‘an unabashed supporter of competition because competitive markets produce better outcomes than regulated or uncompetitive markets.’ Yet we all know that competition does not always flourish by itself; it must be supported and protected if its benefits are to be enjoyed. This agency is a pro-competition agency.’
And while he may have some new challenges, most of the biggest ones are unchanged since Genachowski came to the helm in 2009 ‘ notably, as Wheeler noted, getting more spectrum to market while promoting new services. Some specific debates are still rumbling on too ‘ the finer points of net neutrality; the issues of roaming for rural carriers, especially in 700MHz; the auction of spectrum currently held by broadcasters; ways to increase the stock of unlicensed frequencies for technologies like Wi-Fi. Others are inherited from Genachowski, including the long-running LightSquared saga plus related efforts by Dish and Globalstar to use mobile satellite spectrum to expand LTE capacity and competition.
Wheeler is well used to telecoms industry politicking. He was president of the CTIA, which represents the larger carriers, from 1992 to 2003 before joining venture capital firm Core Capital Partners as managing director in 2005. He also headed the National Cable Television Association from 1979 to 1984. In addition, he has served as an informal adviser to President Obama on telecoms affairs, and in 2009 he led the Obama-Biden Transition Project’s agency review working group, overseeing transitions for science, technology, space and arts agencies. CTIA president Steve Largent said in a statement: “Tom’s deep knowledge of communications issues, strong leadership and clarity of vision in the dynamically changing communications sector will benefit consumers and the economy as we migrate to an increasingly mobile world. Mike also brings an impressive depth of experience in telecommunications, and an appreciation of the important role that wireless broadband plays in driving wireless investment and innovation.”
Spectrum issues will be high on Wheeler’s initial agenda. The auction of the 1.9GHz PCS H Block will take place on January 22 (delayed from January 14 because of the recent government shutdown); and the controversial incentive auctions of broadcast TV spectrum will follow sometime in 2014. Other frequencies which will be auctioned before February 2015 are blocks in the AWS-3 bands (1695-1710 MHz, 1755-1780 MHz, 2020-2025 MHz, and 2155-2180 MHz). Much of the preparation for these sales has taken place, but Wheeler’s team will have to make difficult decisions on whether ‘ and how ‘ to limit how much spectrum large carriers can hold, preferably in time for these auctions.
There are some other pressing rulings, such as what conditions, if any, to attach to AT&T’s acquisition of Leap Wireless, and various decisions connected to LightSquared. The biggest policy debates which will dominate Wheeler’s first year will be net neutrality and the transition to IP. And while the new chairman may talk of free competition and light touch, he will nevertheless need to defend some of the powers of the FCC, the extent of whose authority has been much questioned in recent years.
Although Genachowski did much to restore its reputation, which was tarnished in the Kevin Martin era, some operators believe the FCC has too much power, especially in the neutrality area, while consumer groups feel it needs to be stronger to defend the public, and free competition, against the giants. When Genachowski announced his resignation, public interest group Public Knowledge, which had often clashed with him over mergers and other issues, said in a statement: “For those of us who represent the public, Chairman Genachowski’s term can best be described as one of missed opportunities. He had the opportunity, but declined, to solidify the agency’s authority and ability to protect consumers with regard to broadband – the communications system of the present and future. As a result, there is a real danger that the FCC will become a powerless and irrelevant agency as the nation’s communications networks change.”
This stand-off has not been helped by the long interim phase between Genachowski and Wheeler (despite the best efforts of interim chairwoman Mignon Clyburn). Under Clyburn, as befitted a stopgap administration, only necessary decisions were made ‘ for instance, to clear the Sprint/Softbank/Clearwire deal, and to broker an interoperability compromise between AT&T and the regional carriers in 700MHz. Now the gloves will be off, and the FCC will be making decisions which will shape the telecoms landscape for the rest of the decade, and also determine the power of the agency itself going forward.
Yet in some ways, the appetite for radical change and brave decisions seems much diminished since 2009. Genachowski took office amid a crisis which forced everybody to rethink their norms, and which spurred the new US president to place heavy emphasis on a national broadband plan which was more reminiscent ‘ in tone if not mechanics ‘ of a European, state-initiated program. The early focus on universal broadband set the tone for the whole Genachowski period, and his term was defined by the battle for that universal access and the spectrum to support that, where wireless was the best option. The 2010 broadband plan calls for 300MHz of new spectrum to be found by 2015 and 500MHz by 2020, and the auctions and other actions Wheeler will now have to supervise are a direct result of that ambitious goal.
Genachowski’s greatest achievement was perhaps to set in motion the process for incentive auctions of broadcast TV spectrum in the 600MHz band next year ‘ though poor handling by Wheeler’s team could still result in chaos and limited benefits.
However, another of his key policies, to free up underused mobile satellite bands for radio services, has been far more problematic, though Wheeler still has the chance to turn this around and so claim the eventual credit.
Indeed, as he was getting his delayed confirmation and making his initial plans, the latest twists in the LightSquared saga were playing out. The bankrupt company has filed a lawsuit against key players in the GPS industry, saying their complaints that the LightSquared LTE network would interfere with positioning services had wrecked its chances of success and driven it into bankruptcy. It is naming three GPS equipment makers, Deere & Co, Garmin and Trimble Navigation, and two GPS industry groups, the US GPS Industry Council and the Coalition to Save Our GPS. Philip Falcone’s Harbinger Capital Partners, which owns LightSquared, filed a suit against the same parties in August, in the US District Court in Manhattan, seeking $1.9bn in damages.
In its filing with the US Bankruptcy Court, LightSquared said the opposition of the GPS players caused “untold damage” to the company after it had spent billions of dollars to build up its network. It wrote: “The Defendants engaged in a calculated effort to block the deployment of a new wireless broadband network that would serve millions of underserved consumers at lower prices while increasing competition and innovation in the wireless industry.’
Of course, those promises, centered on a wholesale-only LTE network to support a range of smaller providers, were what encouraged the FCC to support the LightSquared plan with unseemly haste, only to have to pull back amid fears of interference with GPS systems in the adjacent band.
LightSquared is currently auctioning off its spectrum from within Chapter XI, and Dish Network ‘ itself a significant owner of nearby mobile satellite bands ‘ offering the ‘stalking horse’ bid at $2.2bn. LightSquared argues that it would deliver far higher value to its shareholders if it were allowed to operate by the FCC, with various proposals made to safeguard GPS, such as keeping part of the spectrum fallow until better anti-interference mechanisms are in place. By contrast, Charlie Ergen’s Dish is likely to see the chance to acquire spectrum on the cheap, even if it has to hold off on deploying LTE in sections of it.
One recent FCC decision which could boost LTE in satellite bands came last week when the agency agreed to initiate a review process regarding Globalstar’s plan to run wireless broadband services in 11.5MHz of its S-band spectrum. That would boost the value of the spectrum and allow the satellite operator to run a wider range of more mainstream services. Although it has toyed with WiMAX and LTE, its current, more novel, plan is to combine its S-band frequencies with adjacent 2.4GHz unlicensed spectrum to create a 22MHz swathe, which would effectively run Wi-Fi in licensed frequencies, as a private network for wholesale customers and partners. Amazon has been reported to be trialling the system with Globalstar and is the lead candidate to use any resulting commercial network, to support its Kindle devices and Whispernet wireless content delivery.
But although the use of adapted Wi-Fi, rather than high power LTE, would avoid interference issues with neighbors, Wheeler is showing far greater caution than his predecessor ‘ clearly keen to avoid a LightSquared-style fiasco, but also perhaps another sign of a contrasting approach. Tim Farrar of satellite analyst firm TMF Associates wrote on his blog that Wheeler had had significant input into the review order, even before he was officially in charge, and ‘the language perhaps reflects Wheeler’s more cautious stance compared to former chairman Genachowski’s ‘full speed ahead’ approach …. It is hard to predict what this will mean for Globalstar’s potential approval process. However, it is clear that it will take some time, because the FCC is seeking detailed technical studies from commenting parties, and has set a relatively long comment deadline of 75 days after publication in the Federal Register (January or February 2014).’
These early events under Wheeler’s leadership provide some clues to the new-look FCC (which also includes newly appointed Republican Commissioner Michael O’Rielly). They are more about tone and emphasis at this stage than actual policy shifts ‘ greater caution and an unwillingness to upset commercial interests, which at best could lighten regulatory load and encourage new competition, but at worst could make the FCC hesitant and ineffective. The big debates and processes of the next year ‘ the auctions, the net neutrality issues, decisions on M&A and satellite spectrum ‘ will reveal far more clearly what stamp Wheeler will place on the FCC, ad on the whole US landscape.