The Future of Wireless Communication May Be Decided by Professors Who Are Paid for Their Opinions

Who's winning, who's losing, and why.
March 21 2014 6:00 AM

The Wireless Wars

The future of wireless communication may be decided by a massive influence web of lobbyists, think tanks, and academics who are paid for their opinions. 

(Continued from Page 1)

The 600 megahertz band is the kind of airwaves that wireless companies want and need. It travels farther than frequencies above 1,000 megahertz, can penetrate buildings, navigate hilly terrain, and more easily go through vegetation, all of which makes it less likely to lose a connection compared with those traveling on higher bands. It’s also cheaper to operate because it requires fewer towers.

As of August 2012, Verizon and AT&T together owned 74 percent of the low-band airwaves, according to calculations using the FCC’s most recent annual report on the competitiveness of the mobile wireless market. Sprint controlled 12 percent, and T-Mobile owned just 0.2 percent.

Most of T-Mobile’s and Sprint’s frequencies are in the higher bands. AT&T and Verizon argue that the high-band spectrum is equally good because it can carry more data, a characteristic that is desirable in urban areas where demand for wireless data is greatest.

Advertisement

Corporate accountants, however, put a higher value on the lower frequencies. Verizon says in its company filings that its frequencies are worth $75.7 billion, second only to the combined value of all of its plants, properties, and equipment. AT&T reports its licenses are worth $56.4 billion. Sprint owns more spectrum than any carrier but it is almost all above 1,000 megahertz. The company priced its spectrum at $41.8 billion. T-Mobile, which has about half the spectrum Verizon has, reported its wireless licenses are worth $18.1 billion.

Verizon and AT&T have used their low-band spectrum to build networks that cover much of the United States, allowing them to attract more customers. Verizon has about 119 million subscriptions, or about 35 percent of all U.S. wireless subscribers, and AT&T has 32 percent, according to the latest report by Strategy Analytics, a technology consulting firm. Sprint and T-Mobile, whose networks are spotty by comparison, trail a distant third and fourth with 16 percent and 13 percent of the market, respectively, according to the report.

Competition or Revenue?

When Congress ordered the FCC in 2012 to hold the spectrum auction, the goals were to increase the frequencies available to wireless carriers, raise money to build a nationwide emergency radio network, and pay down the national debt. The agency now is writing the auction rules to balance the need to raise money with the desire to maintain competition.

Verizon and AT&T argue that capping what they can buy will lower the price paid for the spectrum, cutting the revenue to the government, or worse, cause the auction to fail altogether.

Sprint and T-Mobile argue caps will allow them and other carriers to obtain low-band frequencies needed to compete against their two bigger rivals. The competition will lower prices and encourage the carriers to develop advanced technologies to decrease costs and improve services.

They also argue limits will encourage more bidders, because companies will believe they have a chance of submitting winning bids if AT&T and Verizon cannot bid in every market. More bidders, they argue, means more revenue for the government. The Justice Department agrees with Sprint and T-Mobile.

In a filing with the FCC in April that drew sharp criticism from supporters of an open auction, the department’s antitrust division argued “rules that ensure the smaller nationwide networks, which currently lack substantial low-frequency spectrum, have an opportunity to acquire such spectrum could improve the competitive dynamic among nationwide carriers and benefit consumers.”

Lobbying War

Those opposing arguments are at the center of the lobbying war. AT&T and Verizon operate some of the most powerful influence operations in Washington.

Last year AT&T doled out $15.9 million for lobbying on a range of issues, according to the Center for Responsive Politics, which tracks lobbying spending. AT&T spent the 11th largest amount of all companies that year, while Verizon ranked 18th.

T-Mobile has increased its lobbying 74 percent in the past three years since its purchase by AT&T was blocked, but at $5.2 million it remains far behind AT&T and Verizon. Sprint doled out even less, spending $2.8 million in 2013.

The money pays for lobbyists to visit members of Congress, or to urge them to call or write the agency. Sen. Chuck Schumer, who sits on the Judiciary Committee, sent a letter Nov. 20 to FCC Chairman Tom Wheeler to urge Wheeler not to institute spectrum limits.

Schumer wrote that the caps “would simply … reduce the amount of spectrum offered for auction as well as the revenue that would be generated in return” as broadcasters would choose not to put up their frequencies for sale for fear that they wouldn’t be able to get the high price that the big carriers could offer—an argument found in FCC filings submitted by AT&T, Verizon, and their hired economists.

AT&T’s and Verizon’s political action committees gave Schumer a combined $18,000 between 2009 and 2013, compared with $10,000 from Sprint and T-Mobile PACs during the same period, according to CRP.

Six Republican House lawmakers—including Rep. Fred Upton, chairman of the Energy and Commerce Committee, which oversees the FCC, and Rep. Greg Walden, chairman of the committee’s communications and technology subcommittee—wrote FCC commissioners in April in response to the Justice Department’s filing, arguing that spectrum caps “will reduce the potential revenues from the auction and possibly cause the auction to fail.”

The six authors, who also included committee members Rep. Marsha Blackburn from Tennessee, Rep. Ed Whitfield from Kentucky, Rep. Billy Long from Missouri, and Rep. Robert Latta from Ohio, received among the largest campaign contributions in Congress from AT&T’s and Verizon’s PACs for the 2012 elections—a total of $107,000 from both carriers, according to CRP. T-Mobile’s and Sprint’s PACs gave the group as a whole less than half that much, a total of $42,000, according to the center.

Spokesman for Latta and Whitfield said AT&T’s and Verizon’s campaign donations didn’t influence the representatives’ positions on spectrum limits. The other members didn’t reply to requests for comment.

“AT&T and Verizon have put on a full-scale lobbying campaign and they’re spreading money all over town and writing op-eds,” said Michael Calabrese, director of the Wireless Future Project at the New America Foundation, which supports limits. “Each side is trying to pressure the FCC, sometimes with public letters, and sometimes with research, and equally often it’s with private phone calls.”

The spending also pays for lobbyists to visit the FCC, where they meet with the staff writing the auction rules and with commissioners who will ultimately vote on them.

Between October 2012, when the FCC issued its notice to develop rules for the incentive auctions, and Jan. 30, when the FCC held a public meeting to discuss its progress, the agency received more than 400 filings that include comments, papers, presentations, and information about visits, Gary Epstein, head of the commission task force writing the auction rules, said at the Jan. 30 meeting.

The outpouring ranks the incentive auction among the most active issues at the FCC in years, said a senior FCC administrator. “It’s a lot,” the administrator said. “A whole lot.”

T-Mobile, which views the auction as a make-or-break event for the company, has been a fixture at the agency. From October 2012 through March 13, lobbyists and executives for the company visited the FCC 36 times, and submitted 20 comments, presentations, letters, and research papers for a total of 56 filings, the most of any organization or company, according to data compiled by the Center for Public Integrity.

One of the biggest complaints T-Mobile gets from customers is the inability to get access deep inside buildings, which can be alleviated with low-band spectrum, said Tim O’Regan, a spokesman for T-Mobile. “Lack of low-band spectrum is the biggest challenge T-Mobile faces,” he said. “It’s critical to the future of our network and critical for the future of the company.”

AT&T and Verizon visited the FCC 15 times each during the same period, according to the center’s analysis, ranking the carriers as the fifth most active. Sprint met with commissioners and agency staff 11 times during the same period, which ranked it tied at 11th.

It’s not the number of FCC filings “that matters most, but rather the quality and depth of a stakeholder’s conversation and advocacy with FCC staff,” said John Taylor, a Sprint spokesman.

The Expanding Opportunities for Broadcasters Coalition, a group of more than 70 television stations that support the auction, had the second most meetings with the FCC, and the National Association of Broadcasters, which may lose members if stations choose to sell their frequencies, was the third-most active group. Other organizations that have often frequented the FCC’s offices in southwest D.C. have been the Competitive Carriers Association, a group that includes as members Sprint and T-Mobile and supports spectrum limits, and Dish Network Corp., which is considering launching its own nationwide wireless network.

Buying Academic Research

But tracking traditional lobbying doesn’t tell half the story of the spectrum influence game. Wireless carriers have hired economists from some of the most prestigious universities to conduct research to support specific positions and attend FCC meetings where they can explain arcane auction theories and rebut other economists’ papers filed by their rivals.

“With this [spectrum auction], the number of factors that go into what is right and wrong is very complicated and subject to debate,” Public Knowledge’s Feld said, “so this has been an extraordinary boon to academic economists. If you do spectrum auction research, you are making a lot of money now.”

TODAY IN SLATE

Politics

Meet the New Bosses

How the Republicans would run the Senate.

The Government Is Giving Millions of Dollars in Electric-Car Subsidies to the Wrong Drivers

Scotland Is Just the Beginning. Expect More Political Earthquakes in Europe.

Cheez-Its. Ritz. Triscuits.

Why all cracker names sound alike.

Friends Was the Last Purely Pleasurable Sitcom

The Eye

This Whimsical Driverless Car Imagines Transportation in 2059

Medical Examiner

Did America Get Fat by Drinking Diet Soda?  

A high-profile study points the finger at artificial sweeteners.

The Afghan Town With a Legitimately Good Tourism Pitch

A Futurama Writer on How the Vietnam War Shaped the Series

  News & Politics
Photography
Sept. 21 2014 11:34 PM People’s Climate March in Photos Hundreds of thousands of marchers took to the streets of NYC in the largest climate rally in history.
  Business
Business Insider
Sept. 20 2014 6:30 AM The Man Making Bill Gates Richer
  Life
Quora
Sept. 20 2014 7:27 AM How Do Plants Grow Aboard the International Space Station?
  Double X
The XX Factor
Sept. 19 2014 4:58 PM Steubenville Gets the Lifetime Treatment (And a Cheerleader Erupts Into Flames)
  Slate Plus
Tv Club
Sept. 21 2014 1:15 PM The Slate Doctor Who Podcast: Episode 5  A spoiler-filled discussion of "Time Heist."
  Arts
Television
Sept. 21 2014 9:00 PM Attractive People Being Funny While Doing Amusing and Sometimes Romantic Things Don’t dismiss it. Friends was a truly great show.
  Technology
Future Tense
Sept. 21 2014 11:38 PM “Welcome to the War of Tomorrow” How Futurama’s writers depicted asymmetrical warfare.
  Health & Science
Bad Astronomy
Sept. 22 2014 5:30 AM MAVEN Arrives at Mars
  Sports
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.