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Phoenix Center: Fewer Companies Equals Lower Prices

The Phoenix Center Tuesday released a policy paper to support the argument that in a world of spectrum constraint, fewer firms, not more, providing wireless broadband can actually lead to lower prices and "possibly" increased investment and employment in the sector.

The paper argues that what it says is the FCC's desire to impede incumbent carriers (like AT&T and Verizon) from acquiring more spectrum "via auction or acquisition" may do more harm than good.

"[P]rices will likely fall as scarce spectrum resources are employed more efficiently," says the paper, "permitting firms to increase output in response to rising demand for bandwidth. With more firms, total industry capacity is lower, so that rising demand must be rationed with higher prices."

Rick Kaplan, chief of the Wireless Telecommunications Bureau, has said that the FCC is not out to impede the big players. "[O]ur goal and intention for spectrum auctions is that every carrier -- big, medium, or small -- that needs additional spectrum should have a meaningful chance to bid for it," he has said of proposed incentive spectrum auctions.

Congress is currently considering spectrum auction legislation as part of the pay-for (estimates of up to $20 billion for the treasury) for a payroll tax break extension package currently being hammered out in Congress on an end-of-the-month deadline. That has prompted a flurry of input on the impact of conditions, or the lack of them, on the wireless space.

One of the paper's authors, Lawrence Spiwak, made the same argument for the impact of spectrum "exhaust" on the market in an op ed for Roll Call last fall, suggesting that "society is better off with a few firms providing high-quality 4G broadband at low prices [than] many firms providing limited broadband services at high prices"

The current House version of incentive auction legislation prevents the FCC from setting any conditions on bidders in that auction, with Republicans arguing that prohibition was a way to prevent the FCC from handicapping big players like AT&T and Verizon. The FCC also opposed AT&T's purchase of T-Mobile spectrum as not in the public interest.

In arguing that the FCC was impeding larger carriers, Spiwak also pointed out in his op ed last December that one of the FCC's conditions on allowing the merger that created LightSquared was preventing them from reselling spectrum to either AT&T or Verizon, the two largest wireless carriers, without prior commission approval.

The Phoenix Center does not disclose the source of its funding.