Adelstein to Tech Sector & Frontline: Can You Hear Me Now?

FCC Commissioner Jonathon Adelstein’s recent speech at the Wireles Communications Association (WCA) conference — and subsequent remarks to the press on the 700 MHz auction have caused quite a stir among those in the blogosphere following this issue. My fellow advocates of open access, such as Matt Stoller at Mydd.com, voiced considerable concern that Commissioner Adelstein (a long-time friend of the public interest) would come down against open-access proponent Frontline and against the position staked out by the Public Interest Spectrum Coalition, the 4G/Tech industry and others in support of larger license blocks. (Go take a look at my Impossibly Long Field Guide if you are lost on who these players are). OTOH, Publius over at Obsidian Wings has posted a defense of Adelstein, in which he also falls into the classic trap (as he does in his (much shorter than mine) auction guide for dummies) in believing that the telcos are the antichrist when, at least in my opinion, it’s a Hell of a lot more complicated. Yo, Netheads! You can hate other incumbents besides the Telcos! Really!

Anyway, to get back to the issue of the day: Adelstein’s speech and subsequent reactions. Matt and Publius raise good points, but neither sees the full picture here. But heck, that’s why folks need TotSF (or so I like to think), to fill in the blanks and provide the needed backstory for those not familiar with how life in the public policy sausage factory works (and its why the average TotSF post is about 4 single-spaced pages — yeah, I talk too much, I know).

Short version: Adelstein was not committing to a position or dissing a proposal. He was sending a signal to the tech guys and Frontline that if they want to get what they are asking for, they need to answer some very real and legitimate questions. Because Adelstein and McDowell are widely considered “swing votes” on critical questions (with Tate and Copps believed focused primarily on public safety), their public speeches (along with Chairman Martin’s of course) get particular scrutiny. Adelstein has not sold out (as feared by Stoller). Nor is Martin a “a wholly owned subsidiary of Verizon”, nor are 4G Coalition (or yr hmbl obdnt) “useful idiots,” as argued by Publius.

So what is going on (at least in my long-winded opinion)? See below….

Before getting to the specifics of Adelstein’s comments, we need to cover a few unwritten rules of how life works in the public policy sausage factory and go into the specifics of the 700 MHz auction.

First, FCC Commissioners and staff must stay “undecided” during the pendancy of a rulemaking. However, they can say — based on the record before them — how they think things should go. They can also talk in a general way about what they think the FCC should do and how it should decide things.

Commissioners (and staff) use their speaking opportunities as a “bully pulpit” to push their agendas and as a way to signal industry (and the public) on the current state of FCC (or specific Commissioner) thinking. The press and FCC watchers (such as industry participants and folks like yr hmbl obdnt) watch these these pronouncements carefully for hints on how to shape advocacy or prepare for FCC decisions. Especially on a hot issue like the 700 MHz auction, Commissioners use their statements to stimulate response and to raise awareness of issues critical to decisionmaking. Since FCc Commissioners will not decide the specifics until they actually vote on an Order, these statements have an inherent vagueness. More importantly, they contain within them an inherent invitation to interested participants to respond.

Here, Adelstein focused on two major hot button issues: Frontline and the band plan. You can see summaries of these (and other issues) here. For those just tuning in, Frontline is a Silicon Valley start up that offers to build out the public safety broadband network on their 12 MHz of spectrum, in exchange, the FCC will create a single National license for 10 MHz of spectrum (the “E Block,”) which the FCC would auction as part of the 700 MHz Auction. The winner of this “E Block” would have the right to negotiate with the public safety guys for access to their spectrum (when not in use) and would lease the E Block commercial spectrum on a priority “as needed” basis to public safety — creating a total of 22 MHz for public safety and commercial use. To sweaten the deal, Frontline proposed that the E Block licensee only provide wholesale access to its spectrum (i.e., no direct retail to residential or business customers), and that the E Block licensee allow any network attachment (aka “wireless Cartefone”). This last condition has attracted support from both Silicon Valley types, the Public Interest Spectrum Coalition, and supporters of open access and network neutrality.

Frontline has faced opposition from a variety of sources. In addition to opposition from incumbents and even would-be bidders like the DBS providers (who want as much spectrum as possible auctioned under the traditional “flexible” licensees get to do whatever they want rules), a number of folks in the public safety community remain skeptical of the Frontline “public-private partnership” approach. Indeed, longtime network neutrality booster and Democratic FCC Commissioner Michael Copps spent most of his concurring statement to the pending Further Notice of Proposed Rulemaking explaining why he remained “highly skeptical” that Frontline’s proposed public-private partnership served the public interest.

So while Frontline did well in making it to this stage, it still has a long way to go. When parties filed comments in May (and again in the first week of June), everyone looked to see if enough public safety folks would rally around Frontline. If Frontline could claim broad support from the public safety community, it would make it much easier to approve. If Frontline got no support, then it was probably dead in the water.

Well, Frontline neither struck out with no support, nor did it hit a home run with major support. The “public safety community” (which is a very large and diverse set of folks) fractured along every conceivable dimension. Some hated the proposal entirely, a handfull loved it as is. Most gave qualified support to the idea of a public-private partnership with varying degrees of enthusiasm and a lot of caveats about all the details that the FCC needed to settle before the bulk of commentors would like the deal.

Which brings us to Adelstein’s comments. As you can see, the official copy of his speech, barely mentions the 700 MHz auction at all, with only passing reference to the public safety issue. Press reports had Adelstein saying after the fact that “the public safety community had so far failed to get fully behind the proposal” and that this cast “doubt” on the proposal.

So, WRT Frontline at least, what we have is the press characterization of Adelstein’s responses to questions. As I have observed in the past, the press have not exactly distinguished themselves in their cluefullnessin their coverage of this auction. But lets assume that they accurately reported that Adelstein expressed concern that the public safety folks had failed to get fully behind Frontline. Does that mean Adelstein has given up on Frontline — despite the promise of using this as a vehicle for open access, network neutrality, and wireless network attachments?

Bluntly, no. I read this comment as a clear signal to Frontline and the public safety community. “Yo guys! If you want to see this proposal, you need to get on the ball and come to some kind of consensus that would let us at the FCC bless this. If it looks like a ruddy mess, we can’t approve it no matter how much we like other aspects of it — since this is about serving public safety. So if the public safety community wants this kind of public-private partnership, and Frontline wants a shot at seeing its rules approved, we need to see Frontline and prominent members of the public safety community coming to terms in the next few weeks.”

Now you all may ask, “if that’s what Commissioner Adelstein meant, why didn’t he just say that?” To which the answer is, he can’t. For one thing, he can only speak for himself, not the rest of the Commission. For another, if he got that blunt, he would be accused of being an advocate for Frontline by telling them what they needed to do to get their proposal approved. That’s not how we play the game here in Policyland. This is a dance as formal and as coy as some social function you might read about in a Victorian social novel. It’s why we inhabittants of Policyland spend so much time reading tea leaves.

So to reiterate, I don’t think Adelstein was panning Frontline per se. Certainly I don’t think Adelstein was rejecting open access and network neutrality (of which Frontline is only one of three major flavors at the moment), especially given Adelstein’s positive comments about the PISC open access proposals in his concurring statement. Just the opposite. He was giving a warning signal to Frontline that if they want their proposal approved, they need to shore up their public safety support. This also says nothing about Adelstein’s support for either the PISC or Google flavor of “open access”.

In short, I believe Adelstein remains as staunch a friend of the public interest and as much a foe of allowing cable and telcos to act as Internet gatekeepers as ever.

The Band Plan Business

O.K., the band plan issue is hideously complex and deserving a whole post of its own to clarify. Briefly, the FCC has to chose how to divide up the geographic coverage of licenses. You can cover big geographic regions by giving licenses that cover Economic Area Groupings (EAGs) or Regional Economic Area Groupings (REAGs). These are geographic regions defined by the U.S. census and cover big blocks of territory (i.e., “the Great Lakes Region,” “the Northeast”). Next down are Economic Area (EA) licenses, followed by even smaller Cellular Market Areas (CMAs). There are proposals for even smaller blocks that would segregate more densely populated urban centers in CMAs from underserved rural areas, but the FCC so far has only proposed going down to the CMA level.

The FCC has proposed to keep the lower 700 MHz band (half the spectrum) primarily divided into the smaller EA and CMA license areas. The big question is the upper 700 MHz band. The tech companies, the DBS Wireless folks, and the incumbent telcos (AT&T and Verizon) want to maximize the number of REAG licenses in the upper 700 MHz band, while the cable cos and stand alone wireless companies (large and small) want to maximize the number of EAs and CMAs. You can find some good charts laying all this out here on this dailywireless.org post.

Why companies split this way and the implications for the development of the band (and thus for wireless and wireless broadband generally) has become the single most contentious and discussed issue in the 700 MHz auction debate. The 4G tech guys and DBS Wireless say we need this band plan to support a new entrant building a new, independent broadband provider — the much hoped for and ever about to emerge “third pipe” that will break up the cable/telco duopoly. This is the reason Kevin Martin gave for supporting large licenses in his concurring statement, prompting a host of Google worshippers to conclude that Google is pulling the FCC’s strings. The telcos talk about how they need large licenses to do efficient national networks, and that needing to aggregate smaller license areas and do roaming deals will frustrate deployment in the band. By contrast, those opposing large licenses maintain that we need to have lots of licenses available for rural guys and emerging competitors, to plug holes in existing systems, and to maximize revenue in the manner of the “highly success” (for varying definitions of success) AWS auction last summer. In addition, I have argued that the debate over license size has huge implications for the ongoing fight for residential customers between cable and the telcos.

The Public Interest Spectrum Coalition has supported larger license sizes primarily to facilitate the mergence of a new “third pipe” provider (a la 4G and DBS Wireless) and because increasing the number of licenses makes it easier for incumbents to signal each other and block new entrants.

The big problem that has emerged in the last month or so with the “third pipe” argument is that it is becoming increasingly doubtful that either a tech giant like Google or the DBS Wireless folks will actually show up to bid in the 700 MHz auction. Google keeps saying it won’t bid. The DBS Wireless guys, the other third pipe “white knight,” look increasingly squishy. The DBS guys recently inked a deal with Clearwire to provide terrestrial wireless broadband and are reportedly making a joint bid for satellite provider Intelsat. While the DBS providers still insist they will show up and bid, these multibillion dollar investments in alternate strategies to beef up their terrestrial and satellite wireless capacity raise questions as to how aggressively they will fight for big licenses — especially in light of their quiting early last time in the face of serious incumbent resistance.

So now imagine you’re Commissioner Adelstein trying to make a decision on the band plan. On the one hand, you have the so-called Tier 2 carriers like Alltel and MetroPCS saying that they need small licenses so they can get into new markets and bring their flavor of cell phone competition to the wireless world. On the other hand, you have folks saying you need to have large licenses to bring in a new, national “third pipe.” But if the third pipe bidder doesn’t come along –or bows out early — then the most likely beneficiaries of large licenses are the incumbent telcos. While I beleive that large licenses are still the right result (particularly because no VC or tech company is going to commit to bidding until they see the rules and decide if they have a chance of winning), I understand the arguments on the other side and why they weigh heavily on Adelstein.

It is in this context that we need to understand Adelstein’s comments on band plan that “We don’t want to set the table unless we know someone’s going to come to dinner.” Again, I don’t read this as being categorically against structuring a band plan to invite a new national broadband provider. I read this as saying “Yo! Silicon Valley guys! If you are serious about this ”third pipe“ bidder coming in, I need to see some evidence that some third party will show up and bid before I risk giving huge licenses to incumbents at the expense of potential competition from the Tier 2 providers.”

I also stress this doesn’t say jack about support or lack thereof for the PISC open access plan. Adelstein praised the Chairman for including the PISC proposals on open access, net neutrality, and incumbent exclusion in the Further Notice back in April, and I see no reason to believe he has retreated from that basic position.

To conclude, I hope to persuade Commissioner Adelstein (and the rest of the FCC) on all our issues. But I recognize that in something as contentious and important as this, all the FCC Commissioners must weigh the competing arguments carefully and use every tool at their disposal to get evidence that will support their ultimate decision. Adelstein has not backed away from his support for introducing wireless competition, nor are those who support large license blocks Bellheads or their “useful fools.” It’s hellishly complicated and critically important, with a limited number of tools available for the Commissioners to engage in the much-needed public dialog. Which, is, of course, why this blog post explaining a 540 word newspaper article is more than five pages long.

Stay tuned . . . .

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One Comment

  1. Ben Byrne says:

    Where do things stand on anonymous bidding or other mechanisms to prevent collusion/signalling amongst incumbents?

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