The FCC Gets Set to Free Wireless
The Federal Communications Commission this month is launching initiatives that will shape the fate of America’s wireless industry. Last week it started to examine competition in the market, and this week it will propose taking Depression-era utility regulations off mobile broadband networks while protecting an open internet. This is only the beginning. The FCC is acting on a rare opportunity to correct its recent mistakes and restore the Clinton-era light-touch regulatory framework that will drive economic growth and job creation.
The mobile industry is experiencing an explosion of entrepreneurial brilliance, investment and falling consumer prices. Wireless carriers are knocking the stuffing out of each other to woo and keep customers. Most have unveiled new unlimited data plans, and smaller players are gaining on larger ones. T-Mobile added 8.2 million net new customers in 2016 at the expense of its two larger rivals. Last week’s announcement that Comcast and Charter would enter the wireless arena portends even more competition.
Wireless prices have fallen 25% in the past decade, according to the Bureau of Labor Statistics. Last year alone they fell more than 10%, and another 7% between February and March this year. Only markets that are intensely competitive witness such price declines.
Consumers understandably have developed an unquenchable thirst for the freedom and empowerment that mobile broadband gives them. In 2016 consumers spent 900 billion hours using mobile apps world-wide, according to the business intelligence company App Annie. Three quarters of the companies in the global app economy are American, according to the advocacy group CTIA. But the U.S. will lose its leadership if the FCC fails to officially declare the wireless market competitive and deregulate intelligently.
Intense consumer demand is tugging hard on wireless networks. America’s wireless infrastructure builders have been responding massively. In the past seven years, more than $200 billion has been invested in wireless infrastructure, $26.4 billion in 2016. Wireless companies built out 4G LTE services from scratch covering 98.5% of the population in 3½ years between 2010 and 2014.
The wireless industry is spending heavily on next-generation technologies, especially to prepare for the Internet of Things. CTIA projects that in the next seven years wireless companies will invest more than $275 billion to bring consumers best-in-the-world high-speed 5G services. This capital surge could create up to three million new jobs and boost America’s annual economic output by $500 billion, according to Accenture.
Yet since 2009 the FCC has ignored its own studies and refused to determine that the wireless market is competitive. That would have contradicted the rationale for its regulation binge, but new political and market realities make a fresh start possible.
The FCC should begin by liberating wireless from the heavy-handed rules of a 1934 law called Title II, which was created when phones were held in two hands. This antiquated law imposes powerful economic regulations on the internet, chilling investment in broadband. On Thursday the FCC will propose to unshackle the net from this millstone of a law. This would restore the bipartisan light-touch policies that nurtured the burgeoning internet Americans enjoy today.
During its latest spectrum auction, which ended in March, the FCC put up a block of television airwaves for sale. The agency tried to micromanage competition by forbiddingAT&T and Verizon from bidding on potentially more valuable airwaves, keeping them from key parts of the auction.
More than 90% of auction revenues came from companies other than Verizon and AT&T. The former spent nothing, while the latter paid less than $1 billion out of nearly $20 billion for all auction participants. The two companies effectively didn’t participate even where they were allowed to bid. Clearly the set-aside blocks were not necessary. Worse, the intervention might have reduced auction participation and proceeds. Going forward, the FCC should avoid trying to outsmart such a dynamic market.
The FCC can take a few other discrete steps. It would accelerate the mobile revolution if it streamlined rules that slow the construction of wireless infrastructure—and deprive consumers of the benefits of next-gen technologies. The agency should also update rules that dictate how much of a particular radio frequency a carrier can own in a market. America’s brilliant wireless engineers are inventing new ways to turn yesterday’s junk frequencies into tomorrow’s gold, rendering current regulations obsolete.
There has never been a better time to be a consumer of wireless services, but today’s rules chain the fast-moving wireless industry to the past. If it’s willing to be bold, the new FCC can brighten America’s mobile future.
Mr. McDowell, a former FCC commissioner (2006-13), is a partner at Cooley LLP and chief public policy adviser to Mobile Future.
Appeared in the May. 17, 2017, print edition.