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House bill is bad signal for future of wireless industry

The danger of cellphone networks being clogged up by users and their data finally has Congress' attention. But its answer to the problem may end up doing more harm than good.

A bill passed by the House last week would encourage television broadcasters to voluntarily hand back their airwaves, which the government would auction off to the highest bidder, sharing the proceeds with the broadcasters.

Wireless companies such as AT&T and Verizon are expected to snatch up the newly opened airwaves to help speed smartphone Internet connections and ensure fewer dropped calls.

But the legislation is critically flawed. Should it become law, we're likely to end up with an even less competitive wireless market. And Super WiFi — a new wireless technology that promises ultrafast Internet connections — may be critically hobbled.

The potential problems created by the bill are so big that Mark Cooper, director of research at the Consumer Federation of America, calls it "a 100-year mistake."

Mistaken as it might be, the bill is a response to a real problem. Thanks to the growing use of smartphones and similar devices, the airwaves are becoming increasingly crowded. Cisco Systems predicts that mobile data traffic in 2015 will be 26 times greater than in 2010. If nothing is done, that growth will lead to more dropped calls, slower data connections and inaccessible networks.

Wireless operators have a number of ways to address the spectrum crunch in the near term, but many experts believe a longer-term solution will have to include assigning more spectrum for wireless use. Fortunately, there's plenty of spectrum out there — the underutilized airwaves now controlled by the television broadcasters.

About 90 percent of Americans have wireless phones, but only about 32 percent of U.S. households with a TV tune into over-the-air signals. Viewership of some of the smaller channels, which are the ones that would most likely be put up for auction, is far less.

Allowing wireless companies to use that spectrum would mean that a greater portion of Americans would benefit from them. It also means there potentially could be fewer cellphone towers because the signals can travel long distances and penetrate walls.

But the House bill would severely restrict the ability of the Federal Communications Commission — which oversees the airwaves — to ensure that there is healthy competition in the wireless phone market.

The bill would prohibit the FCC from restricting who can bid in the spectrum auctions, as long as they meet some minimum requirements. The commission is likely to divvy up the airwaves vacated by the broadcasters into several bundles. To ensure competition, the commission might want to bar companies that have won the auction on one or more bundles from bidding on more of them. But the House bill would deny the commission that power.

Cooper and other consumer advocates say that move would all but ensure that the Big Two of the wireless industry — AT&T and Verizon — will win the auctions. The results are likely to be higher bills, poorer customer service and less choice in plans and phones.

The House bill "is setting up a rigged outcome," Cooper said. "Verizon and AT&T will be the winners, and everyone else will be the losers."

The bill would also bar the FCC from applying network neutrality rules to the companies that win the auctions. So those companies could ban particular apps or slow their data access. Instead of being able to use Google Voice to make phone calls, Netflix to watch movies or Spotify to listen to music, you could be stuck with AT&T's or Verizon's proprietary apps and would have to pay whatever those companies wanted to charge for them.

But perhaps the bill's biggest flaw is that it might severely hamper Super WiFi, a technology under development that would use the so-called white spaces between television channels for unlicensed wireless data transmissions.

Following the planned spectrum auctions, policymakers plan to "repack" the remaining television stations so that they are closer together. This is likely to result in fewer white spaces. To prevent interference with those more crowded stations, Super WiFi signals in the remaining white spaces will have to be lower power and therefore less useful.

Backers of the bill say they are just trying to ensure that the government gets as much money as possible for these prized airwaves. But given the popularity of regular old WiFi, the market for Super WiFi devices is potentially huge, with the possibility of generating far more economic activity — and tax revenue — than the government might give up at auction. Just like WiFi, Super WiFi also has the potential to be a big benefit to the wireless networks, allowing them to offload traffic at little or no cost.

Super WiFi also could help ensure competition and innovation. Because no one would own the spectrum, no one could dictate what applications or devices could be used on it. And a company could potentially offer discounted wireless Internet access over it, because they wouldn't need to worry about recovering their licensing costs.

House bill is bad signal for future of wireless industry 12/21/11 [Last modified: Wednesday, December 21, 2011 9:11pm]
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