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Obama’s wireless spectrum solution: why it may NOT work.

During the State of the Union, the President remarked that “within the next five years, we’ll make it possible for businesses to deploy the next generation of high-speed wireless coverage to 98 percent of all Americans.”

Last week, we learned just how he planned to do that when he submitted his budget for 2012.  In it, President Obama proposes that the government spend $2.5 billion on a plan to expand rural high-speed wireless access by auctioning off  spectrum currently held by television station owners ( and  called white spaces because they once were used to send analog broadcast signals before broadcasters converted to digital and currently are not being used at all).  Expanding rural areas is key to increasing the wireless usage and broadband adoption build out rate nationwide.

The President is looking for dual benefits to the auction, anticipating to  fetch $27 billion in proceeds from them that could be used for reducing the US government’s  1.6 trillion dollar deficit.

Thus, in order to get more spectrum dedicated to wireless high-speed, the budget proposes paying TV station owners for their unneeded airwaves.

There are several hurdles to this 5-year plan of the President’s, however.

First, the plan has to get through a contentious Congress. You know, the one where one house is run by the Republicans and the other by the Democrats and which  currently is having a very difficult time agreeing on anything?

Second, broadcasters need to get on board, and sufficient of them need to agree before the plan can really work.   Not all of them may be willing to go with the plan until details are ironed out,  and even then, the larger broadcasters (represented by the National Association of Broadcasters) and the smaller single owner and operator stations may not be on the same page.  They have different priorities and issues.  There is also the concern about interference and making sure, technically, the spectrum can be reworked to accommodate the new wireless usages.

Perhaps, that is what Google and others are working on now in a plan to reconfigure the white spaces but will they be done in time to implement the technology, adopt interoperability standards before the auctions? Post-auction build out takes time too and certainly some buildout will surpass 5 years.

Also, I must say that one thing that jumped out at me about the proposal is the fact that  broadcasters will be getting money for public airwaves they got for FREE for the most part.  Granted, since the days when the government gave away licenses for free, the broadcast industry has built upon the licenses and created tremendous value to them, but still, at the end of the day, the spectrum is still a public resource.

Notwithstanding my concerns about how it ends up eventually, I hardly believe it will happen anytime soon, and  definitely not within the next 5 years.

Given the legislative approval overlay, the technical details that need to  be worked out and the structural and procedural framework that still needs to be ironed out, it is very unclear whether approval and agreement will come within the next five years, let alone a complete build out of 98% of the country by then!

Herein lies the problem with government solutions.  It does not appear that ordinarily, without tremendous incentives, the private sector may be willing to build out the rural areas of the country that are not population dense.  Simple economic principles  do not support extending service to rural areas considering that the costs of traditional landline based build out would be tremendously excessive compared to the returns they would receive on the investment.  Even wireless build out takes a tremendous investment.

The only way it may work is if investment be focused on the creation of unique hybrid models that include wireless, and other over the air technology, such as satellite.  Having spectrum is one thing, but creating an ecosystem that is symbiotic and fits in with the current Internet is another thing.  Notwithstanding, low infrastructure  investment costs  may indeed lure private sector firms and companies to come in and compete.

Without concrete evidence that the investment cost will be worth it, the challenge then would be when we do get to the point of auctioning the licenses, what will be the incentives for private companies to build out in rural non-cost-effective areas?

It’s a chicken and egg conundrum.  Before selling the farm, the feds need to be certain that if you build it, they will come.

If not, this initiative will be considered an example of wasteful expenditure that could be used against this current White House administration.  It will create the appearance of it being inefficient.  I’m not certain who is advising the White House, but hopefully it includes experts that are knowledgeable of the business and consumer realities of building out in rural areas.

Promoting policy requires taking the necessary steps of studying the industry and making sure the outcome intended has a high probability of coming into fruition before acting.

There has been too many instances in the past where a regulation, legislation or government solution had an unintended consequence and actually harmed those it sought to help.

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2 comments

  • […] This post was mentioned on Twitter by Kristal High, Jeneba Jalloh Ghatt. Jeneba Jalloh Ghatt said: Obama’s wireless spectrum solution. Why it may NOT work. http://bit.ly/f4hOJg […]

  • I like this post. There is no way Obama’s so-called Net Neutrality plan will ever work out. It will stop innovation and will keep people from having access, rather than give it to them.

    If the govt takes away the motivation for innovation, there will be no creativity in the marketplace. Then backbone companies like my husband’s will close, lay off workers, and the govt will have a hard time finding someone to do that expansion.

    In short, good luck with that, President Obama. I support the free market, and anytime the government gets involved, it costs more, and is usually a disaster. Government is only needed for such things as fire, police, EMS, and basic governance.

    We don’t need a bunch of nanny-stater liberals running things, and that’s exactly what we got when a bunch of whites felt guilty and elected “Him”. If they feel that way, they can undo their wrongs and vote in one of several great black conservatives running in ’12.

    Thanks and keep up the great work!

    By the way, about the rural areas…my parents live in a very rural area because they CHOSE to. We taxpayers are not obligated to provide for those in rural areas. Where one lives is a choice, with few exceptions. I live in a city and moved away from a suburb. My parents left our suburb and moved to a rural area. It’s all about choices.

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