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A 600 MHz “UNE-P-like” Wireless Auction? Part 10 Government Spectrum Waste Fraud & Abuse Series

Just when the pending 600 MHz “incentive” FCC auction looks like it could not get more unworkably complex than a reverse, “incentive,” auction with looming FCC bidder limits, T-Mobile proposes to add a “dynamic” twist where the rules would then change as the auction goes along depending on how much bidders bid relative to a government-estimate that may or may not have any basis in economic reality. 

To use a diving metaphor, this is like a synchronized diving event with unknown dozens of divers that first must do a “reverse” back flip to “incentivize” another set of divers right behind them to then do a front flip, but only if the particular diver before them does a reverse back flip that individually gets a good enough score to make a follow-on dive possible, and then if that happens for some of the diver teams, any follow-on dives would then be scored “dynamically” depending on a random target score of the previous dive, which would then determine if said diver can dive again or not.

That’s essentially the latest T-Mobile “dynamic spectrum rules” proposal for the 600 MHz auction that T-Mobile just proposed and released to reporters.

It can and does get worse.

The economist behind the T-Mobile proposal was Deputy FCC Economist when the FCC was nano-implementing the 1996 Telecom Act and came up with TELRIC pricing and UNE-P. UNE-P was an elaborate FCC ruse to get around the plain language of the Telecom Act and get a 50-60% resale discount for all telecom services (a platform) for CLECs, rather than the ~20% platform resale discount methodology in law.

That era was the FCC’s most hyper-regulatory, where the FCC’s economists, staff and Chairman Hundt imagined that the FCC’s visible hand could set most every price, term and condition better than the market’s invisible hand could through competition.

Then the FCC had no trust or belief in facilities-based competition or market economics. Thus the FCC created fantasy economics and competition via regulation to mandate their desired market outcomes. The FCC’s artificial economics proved hugely destructive because it fueled huge investment speculation in FCC-backed businesses that created market bubbles around CLECs and fiber backbone companies.

Sadly, the FCC’s hubris resulted in every single CLEC going bankrupt when the tech bubble burst; and it also cost American investors over a trillion dollars in investment losses in fiber backbone equipment and operating companies that also collapsed when the tech bubble burst.

Auctions work when there is free market competition based on supply and demand; risk and reward; and comprehensible predictable rules. Then spectrum can find its highest and best use and the taxpayer is best rewarded.  

Auction over-regulation fails because the FCC imagines it can predict and coerce companies with free will and means, to do what regulators want them to do, not what the companies, their shareholders, or their customers want them to do.

This 600 MHz spectrum auction has become a hubris-magnet for those who imagine they can solve all the FCC’s wireless issues in one fell swoop. This over-reach spells trouble for everyone involved.

Hopefully, the FCC will learn from the past and not try and accomplish too many things so that none get accomplished or accomplishedwell.

Don’t forget the FCC blew the 700 MHz public safety auction last time. Public safety still does not have its own network a decade later despite it being a central 9-11 recommendation.

The FCC has no one to blame but themselves if the FCC blows the 600 MHz auction because they repeat past mistakes.  

Lastly and most importantly, the simple solution here to avoid all these auction contortions long term is to get the Federal Government to stop hoarding and wasting valuable spectrum that should be cleared and auctioned.  

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Government Spectrum Waste Fraud and Abuse Research Series

Part 1: U.S. Government's Obsolete and Wasteful Spectrum Hoarding and Rationing

Part 2: U.S. Falling behind the World in Auctioning Broadband Spectrum

Part 3: U.S. Government's Obsolete and Dysfunctional Spectrum Management

Part 4: America’s Real Wireless Problem Is Not Too Little WiFi

Part 5: The Looming Government Spectrum Scandal

Part 6: The FCC’s Obsolete Wireless Competition Mindset

Part 7: DOJ Joins FCC in Picking Market Winners & Losers

Part 8: The FCC/DOJ’s One Gigahertz Spectrum Charade

Part 9: The New U.S. Spectrum Policy has Big Problems