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Empowering Small Businesses

by: Roger C. Sherman, Wireless Telecommunications Bureau Chief

August 1, 2014 - 10:01 AM

Today, Chairman Wheeler circulated a proposal to open new opportunities for small and growing businesses in the mobile marketplace. Although the proposal may sound technical – updating the Commission’s approach to small business participation in wireless auctions— the purpose is simple: To provide innovative, smaller companies the opportunity to build wireless businesses that can spur additional investment and bring more choices to consumers.

Think about the wireless industry today. Consumer demand is exploding, data usage is growing exponentially, and faster 4G networks enable even more data services. That kind of growth should naturally lead to more opportunity for more businesses to serve more consumers.

But current FCC rules stand in the way. The current rules are a by-product of an earlier time— before data services became ubiquitous, before Congress instructed us to make more spectrum available to wireless networks, and, equally important, before consolidation in the wireless industry accelerated.

When the rules were first written in the 90s, we believed that bidding credits for spectrum auctions should be used only to acquire licenses by companies that would engage exclusively in building their own networks to provide retail or wholesale services – often referred to as “facilities based” service. That made sense when the wireless industry was in its infancy.

But today the standard for economic opportunity should take a broader, and longer, perspective. Considering the significant challenges new entrants face in building wireless networks, we can and should provide smaller businesses— including enterprises owned by women and minorities – a better on-ramp into the wireless business. Here’s one way:  smaller companies may want to leverage business partnerships with larger companies through more flexible leasing arrangements to gain access to capital and cash flow, not to mention operational experience. Allowing structured entry into the wireless business make sense, especially given the billions of dollars it would take to build a new national network from scratch. With experience in operations and investment, smaller networks will have the prospect of progressing into more robust, facilities-based competition, which has been, and remains, a critical goal of the Commission.

Thus, the NPRM being circulated today proposes to update our rules in a way that recognizes – and confronts – the challenges new entrants face in entering the wireless industry. Challenges like raising funds to compete in an auction, finding a revenue stream to support business expansion, or developing a business model based on market needs rather than regulatory mandates.  Perhaps most importantly, the NPRM recognizes the challenge of entering into a marketplace in which more than 95 percent of existing customers are served by the top four providers.    

Of course, this policy will have to be policed. Some may try to take advantage of this flexibility to gain a discount for large incumbents, which we will not allow. We will be on the lookout for such abuse and enforce our rules vigorously. 

Protection will come from the proposal’s focus on who is “calling the shots.” The small business entrepreneur must exercise independent decision-making authority.  If the small business is a stalking horse for another party, then the bidding credit will be lost.

The proposal addresses another important issue – also linked to the trend towards consolidation in the wireless industry. We must make sure that the biggest providers are not able to limit broad participation in the spectrum auction. As promised in the Mobile Spectrum Holdings Report and Order, we now seek comment on whether and how we should restrict the ability of wireless companies to combine their bids during an auction. 

Our goal is to promote the participation of as many parties as possible in the auction. If two of the largest companies are able to bid as one combined entity in the auction, their combined resources may have the effect of suppressing meaningful competition. Therefore, the item tentatively concludes that joint bidding arrangements between nationwide providers should not be allowed. It also asks questions about such arrangements between providers of different sizes.    

The Chairman’s goal is to have common sense rules in place before the Incentive Auction, and we hope all stakeholders will offer constructive suggestions so we can work together to empower small businesses and entrepreneurs to participate in the spectrum economy.

Updated: August 1, 2014 - 11:34 AM
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