Few areas of our economy hold more promise for aspiring entrepreneurs and innovators than the wireless broadband sector. According to a Boston Consulting Group analysis, it already contributes $548 billion annually to U.S. GDP, and it is projected to account for 5 percent of our economy by 2020. BCG also reports that 90 percent of mobile consumers want even faster data speeds, broader coverage and other improvements. The opportunities being created by the wireless revolution are massive and will only continue to grow.
Small businesses, including women- and minority-owned businesses and rural service providers, should have the opportunity to share in this growth, but they have faced significant barriers to meaningful participation in the industry. At our next Open Meeting, the Commission will vote on rules that would revamp our outdated spectrum auction bidding policies to help these entities better compete in today’s mobile marketplace. At the same time, our reforms will enhance the integrity of the FCC’s auctions and ensure large corporations can’t game the system.
Making sure small businesses have real opportunities to provide spectrum-based services has long been a goal of Congress and the Commission. In the 1990s, the Commission enacted rules creating bidding credits for small businesses in spectrum auctions, fulfilling our Congressional mandate to help these entities compete more meaningfully at federal spectrum auctions.
It has never been more vital to wireless competition to help smaller businesses obtain additional investment and offer more choices to consumers. However, the Commission’s competitive bidding rules have not been updated since 2006. Nine years ago, most mobile subscribers still relied on 2G connections, while today we’re leading the world in 4G and looking towards a 5G future. Considering the rapid changes in the marketplace and the significant challenges new entrants face in building wireless networks, now is the time to update our auction policies and provide smaller businesses— including carriers serving rural areas – a better on-ramp into the wireless industry.
The draft revised rules I circulated to the other Commissioners today would provide greater flexibility for qualified small businesses so that they can better compete. For example, in today’s mature wireless industry, offering facilities-based wireless service is no longer a viable business plan for small enterprises, yet that’s what our rules require in order for small businesses to qualify for bidding credits. We propose eliminating this constraint on business model innovation and freeing small businesses to make decisions that work best for them. The rules would also create a new rural business bidding credit that will incentivize participation in future auctions by rural service providers in the communities they serve.
In addition to expanding opportunities for small businesses, the modernized rules will increase transparency and efficiency to prevent potential gaming or abuse, as well as protect the integrity of the Commission’s auction process. In particular, we establish the first-ever cap on the total value of bidding credits, minimizing an incentive for major corporations to try to take advantage of the program. We must also make sure that small businesses receiving credits are exercising independent decision-making authority. We will not allow small businesses to serve as a stalking horse for another party.
The Commission will also consider another item aimed at promoting competition in the wireless industry. As part of last year’s update to our Mobile Spectrum Holding rules, the Commission voted toimplement a market-based reserve of up to 30 megahertz of spectrum per market in the Incentive Auction for bidders that do not currently hold significant amounts of low-band spectrum, provided that eligible bidders pay their fair share of auction costs.
The Incentive Auction offers one of the last opportunities for competitors to acquire significant quantities of low-band spectrum. With more than 70 percent of low-band spectrum in the hands of just two providers, one of the Commission’s priorities is to ensure that multiple providers have a meaningful opportunity to acquire these valuable airwaves, which is critical to competition among wireless carriers. This is why the Commission voted to set aside this reserve a year ago.
While some parties have petitioned the Commission to increase the size of the reserve, the draft Order on Reconsideration I am circulating today would maintain the reserve size at the current level. The draft Order concludes that the current reserve size of 30 megahertz balances the desire to make low-band spectrum available to parties with limited holdings while facilitating competitive bidding for all auction participants.
The rules adopted last year permit national carriers to bid for reserve spectrum in markets in which they have limited low-band spectrum and do not restrict any reserve-eligible bidder from bidding on unreserved licenses. There will be significant spectrum made available in all markets of the country to all bidders. As a result, consumers will benefit directly from competition in all parts of the country.
We will also consider a Public Notice establishing the bidding procedures for the Incentive Auction, which is set to commence in the first quarter of 2016. The Public Notice reflects the views of many parties who provided comments in the Commission’s initial proposal in December 2014, resulting in a balanced solution that meets the Commission’s statutory obligations and ensures the flow of the auction is transparent and straightforward.
It is another crucial step forward in the process of designing and implementing an effective and efficient auction that will bring more capacity for wireless broadband services to consumers.
I look forward to working with my colleagues to update the Commission’s rules to increase competitive access to spectrum and provide consumers and businesses with more choices of wireless providers, lower prices and higher quality services.