Upcoming FCC Meeting Holds Huge Competitive Implications

Decisions made at the upcoming FCC meeting on November 4th could significantly impact telecom’s competitive landscape. The tentative agenda includes two huge wireless merger approvals, a vote on the “whitespace” unlicensed spectrum order, and revamping of the intercarrier compensation system used among telecom carriers. The wireless merger decisions include the Verizon – Alltell and Clearwire-Sprint sprint deals. The “whitespace” inititiave uses spectrum in the “whitespaces” between television channels that will be freed up upon the digital TV transition. This spectrum is prized because of its good propogation and the significant amount of spectrum that will be available. There is significant opposition from broadcasters and established wireless carriers, including T-mobile, who argue that the use of this spectrum will create serious interference problems for their services. Here’s a breakdown on some of the potential implications if these initiatives pass muster on the Nov. 4th meeting.

Implications from the Verizon-Alltel deal include:

• A combined Verizon-Alltel will create the largest wireless carrier in the U.S., surpassing the current number one carrier AT&T
• As a condition of the merger, the new entity will have to shed numerous rural markets (approx 100 at last count), opening the door for potentially new competitors in those markets

Implications of the Sprint-Clearwire deal include:

• Formation of a true nationwide WiMAX operator, who could potentially offer a third broadband pipe option into the home
• Empowerment of several large cable companies to offer their own branded broadband wireless service
• A first to market lead of months (maybe years) over other 4G competitors

Implications of the “whitespace” initiative include:

• The potential empowerment of numerous competitors who can offer yet another broadband wireless option, who some call Wi-Fi on steroids
• Potential interference with existing wireless carriers and broadcasters that will have to be resolved
• Potential for a plethora of new wireless devices and applications that are designed to take advantage of the new connectivity.

The implications of intercarrier compensation (ICC) reform are really too complex and lengthy to list in a blog post. ICC is a set of rules that dictates how telecom carriers compensate each other for interconnecting calls. It’s a myriad of state and federal rules that is so complex that the reality of this being resolved at this upcoming FCC meeting is laughable. There are billions of dollars at stake and entrenched special interests of large and small wireline carriers, wireless, Internet, and cable companies, most of whom have powerful influence in Washington. If there ever were a contentious issue in telecom policy, this is it. It’s going to take real leadership to reform the system, and with a new administration on deck, it’s highly unlikely that this issue will be dealt with in any meaningful way until next year. If reform does happen, and that’s a big if, it could fundamentally change the telecom system as we know it, with winners and losers, and probably a lawsuit or two to boot. Should be an interesting meeting