Are Auctions an Appropriate Way to Allocate Microwave Spectrum?
Recently the U.S. Congress requested information from the FCC regarding the usage of the 11, 18 and 23GHz microwave point to point bands. This move is seen by many industry watchers as the first step in preparing these bands for auctioning.
Auctioning spectrum is seen by many in the political establishment as a good way of raising large sums of money. The 3G auctions in Europe raised $30 billion in the U.K. and $45 billion in Germany and although these figures will probably never be reached again, the attraction for governments trying to balance the books in an economic downturn is clear to see. However, these figures were for cellular access spectrum and there is evidence of microwave spectrum auctions being priced too high for operators and no bids being received, e.g. the original 28GHz auction in the U.K during 2000-2002. But even if the bidding process itself is successful, is granting large amounts of spectrum to a single operator the right way to allocate microwave spectrum?
Let’s look a little deeper into how microwave spectrum is used and allocated in most cases today in licensed common carrier frequency bands. An operator wanting to install a microwave link between points A and B would seek to obtain an individual license for that link in that specific location and frequency. This allows others to apply for other frequencies or even the same frequency in different locations. This approach maximizes use of the available spectrum.
Now let’s look at the block licensing approach. Here a block of spectrum (either on a national or regional basis) is allocated to one user. Block allocations on a regional basis make sense for multipoint applications like fixed wireless access or mobile network applications. However, in the case of point to point (PTP) allocation a block license holder may not have requirements for that entire spectrum, but because it is now their spectrum, no one else can gain access, often resulting in under utilization. This is the situation currently with the 38GHz band in the U.S. and is leading to some in the industry to push for the availability of additional spectrum.
Another example of this is the 28GHz LMDS band, where service take up has been very low, but has effectively blocked out this band from other uses/users. Another concern for the block licensing approach and one that affects equipment vendors is that with fewer operators there are fewer equipment contracts thus leading some manufacturers to be “frozen” out of the market. This will ultimately reduce choice for all and reduce innovation and competition.
Referring back to the announcement, it makes no mention of what would happen to the holders of existing link licenses who will have engineered their networks based upon the current rules. What would happen to these links should that band now be auctioned off as a block? Spectrum auctions also break the U.S. into many smaller regions, with each regional block license being auctioned to the highest bidder. This leads to the question of demarcation and coordination between adjacent regions, particularly for links that may need cross-regional boundaries.
All in all, it would appear that based on evidence to date, auctioning FCC Common Carrier microwave spectrum will be tremendously complicated and likely not in the long term interests of the industry.