Wednesday, January 06, 2010

Wireless broadband and competition

Yesterday Senator Conroy released his long promised Green Paper on the digital dividend. For the newbies the "digital dividend" is taken to be the spectrum previously reserved for broadcast services to be freed up by the conversion to digital broadcasting. One should note that there have already been two other "digital dividends" - the first in the provision of extra channels to consumers, the second in terms of an economic boon to equipment manufacturers, consultants and ad agencies to sell the conversion message. We also learnt yesterday of a fourth digital dividend - that for the satellite operators who will get to carry all the digital terrestrial channels.

The Green Paper doesn't reveal much new. The fact the Government is "targeting" 126MHz of spectrum as the dividend accords with the work genetrally in the ITU-WARC and APT on spectrum. The next AsiaPacific Telecommunity Wireless Forum (AWC-WF) in Japan is programmed to have a workshop on "Next Generation Mobile ommunications". (The membership of the APT is countries represented by Government Departments or regulatory bodies. However its Associate Members are more diverse and include operators and vendors. An interesting questio is how the European vendors decide which country they decide to be members of APT under.)

Meanwhile in the US the White House has called on regulators to make more spectrum available for wireless internet access. In a submission to the FCC the DoJ said;

Given the potential of wireless services to reach underserved areas and to provide an alternative to wireline broadband providers in other areas, the Commission's primary tool for promoting broadband competition should be freeing up spectrum.

This in part sees wireless delivered broadband as competition to fixed. But consumer groups have voiced concern;

Consumer groups, which have been critical of the FCC's approach on broadband, said the comments by Justice and the NTIA indicate the administration agrees there are not enough options for Internet users. "They are going out of their way to say competition is important and that there isn't enough and this is a new approach," said Mark Cooper, president of the Consumers Federation of America. "The FCC has been looking at spectrum as the great savior, but then they have to answer the question of what happens if spectrum gets captured by incumbent wireline companies."

In Australia the mobile industry is doing a valiant job of pushing the case for the need for additional spectrum as revealed in their various presentations staking claims for both the digital dividend and the 2.5 GHz bands. Both of these are already allocated in the US.

These thoughts of "inter-modal" competition are important (and will be discussed below). The issue I want to return to here is the question of whether - in the long run - competition in wireless delivered services is efficient. The first question to address is "what efficiency" as we may need to distinguish between static and dynamic efficiency (too long to explain here). But it isn't hard to demonstrate that in the long run one and only one wireless network is efficient - on the simple basis that every user can access all the available bandwidth, or more generally, there is less congestion for the same amount of spectrum. That is we probably need another NBN - this time a wireless NBN. This could be more relevant for the US - as there is not a lot of "unused" spectrum to be freed up. The issue might be about getting greater productive efficiency from the spectrum already released.

This brings us to the important question of inter-modal competition as opposed to competition between different networks in the same technology. This is the competition that does make sense where there is enough differentiation for both networks to have viable core business cases and they compete at the margins - wireless on mobility and fibre on speed. But it does introduce important questions about vertical integration in mobile networks and the potential anti-competitive consequences of allowing mobile network operators to start "bundling" FTTP services. The classic point will be where a mobile operator delivers the customer their telephony service on a picocell, so the customer's traffic is offloaded to the FTTP network while they are at home. Our policy makers and regulators will only think about this after it becomes a problem, not before.

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