Two rural cellular associations,
Rural Telecommunications Group, Inc. (RTG) and the Rural Cellular Association
(RCA), are importuning the FCC to delay its scheduled November
4, 2008 vote on the proposed merger of Verizon Wireless and Alltel Corp.
until the FCC resolves three pending industry-wide matters that "impact the competitive wireless landscape." The currently pending matters identified are: (1) a rulemaking reexamining the roaming obligations of commercial mobile radio (CMRS) service providers; (2) a rulemaking regarding exclusivity arrangements between CMRS carriers and handset manufacturers; and (3) a rulemaking considering the imposition of a spectrum aggregation limit on all commercial terrestrial wireless spectrum below 2.3 GHz. RTG and RTC argue that action should be taken on all three rulemaking proceeding before the FCC acts on the license transfer proceeding.
This is exactly backwards.
Because the FCC has teed-up in industry-wide rulemaking proceedings
all of the contentious issues raised in opposition to the proposed merger,
it should proceed expeditiously to address the merits of that transaction,
leaving the industry-wide issues to be dealt with in the rulemaking
proceedings. This would return some semblance of rationality to
transfer review process run amuck.
Backwards also describes the
direction the three pending rulemakings would take the wireless industry:
back to the days of a pervasive regulatory framework suited for the
cellular duopoly of old. Although the wireless industry is undeniably
undergoing consolidation, it remains competitive, as the FCC found in
its last Annual
CMRS Competition Report.
More importantly, while opponents of the Verizon Wireless-Alltel merger
focus solely on consolidation of existing market participants, they
ignore imminent new entry in wireless markets.
For example, USA TODAY reports that Cox Communications plans to launch
a wireless phone service "in the second half of 2009 that ultimately
will make the No. 3 cable operator a rival of AT&T, (T) Sprint (S)
and Verizon (VZ)." In the FCC's recent 700 MHz auction, Cox
won 14 A Block and eight B Block licenses, and, in addition to wireless
phone service, may
also be planning
to offer a wireless broadband service within its service footprint.
Another 700 MHz auction winner, direct
broadcast satellite provider EchoStar Communications, won enough E block
spectrum to create a nearly-national terrestrial network, reportedly giving EchoStar the opportunity to
create its own facilities-based "triple play" services, an objective
it long has sought. Cox and EchoStar will be joined by Comcast, Time
Warner, and Bright House, who
plan to use "New Clearwire," a company formed by combining
the fourth-generation wireless assets of Sprint Nextel and Clearwire
Corp., to provide voice and data services to mobile subscribers.
In other words, no less than five of the top ten multichannel video
programming distributors in the nation are poised to enter the wireless
voice and data marketplace as either regional or national competitors.
As to the Verizon Wireless-Alltel
merger, the FCC should expeditiously conclude its license transfer review
on the merits by confining itself to examining only merger-specific
public interest harms and benefits and leave industry-wide issues for
determination in industry-wide proceedings. The same admonition holds
true of the FCC's review of the Sprint-Clearwire transaction:
the agency should refrain
from extracting extraneous "voluntary" agreements from the license applicants merely
because it can. The severe institutional problems associated
with the FCC's tendency to exceed its statutory powers in the area
of license transfer reviews were ably elucidated in a law review article
written by Bryan Tramont, entitled "Too Much Power, Too Little
Restraint: How the FCC Expands Its Reach Through Unenforceable
and Unwieldy "Voluntary" Agreements," published in the December,
2000 issue of the Federal Communications Law Journal, 53 Fed. Comm.
L.J. 49 (2000). If anything, the problem has only increased
in magnitude in recent years.
When the FCC does take up those industry-wide requests to re-regulate the wireless industry, one would hope that it makes "evidence-based" decisions, taking into account both consolidation and off-setting competitive entry. It is worth noting that that the areas least regulated by the FCC appear to have been among the most successful in terms of bringing new and innovative services to consumers. It is time the FCC incorporated this understanding into its policy- and rulemaking decisions.