Minority Involvement in the (Very Likely) Spectrum Auctions: Where Do Their Interests Lie?

by Latoya Livingston on February 14, 2012

Mobile/wireless spectrum is essential to minority adoption.  Study after study has found that African Americans and Hispanics rely on their mobile devices to access the Internet more than any other demographic group.  But the growth of this market is directly attributable to a much less tangible resource, one that is scarce and finite – yet essential – to enabling wireless data networks: spectrum.

In response to the looming spectrum crunch, the FCC is seeking Congressional authority to conduct incentive auctions to free up and reallocate broadcast spectrum for wireless broadband applications.  Under this proposal, Congress would grant the FCC the authority to run two-sided, voluntary spectrum auctions.  The process would allow current licensees to voluntarily contribute spectrum and in return receive a portion of the proceeds of the auction.

The spectrum auction is needed to face this impending digital crisis.  However, making additional spectrum resources available in a timely manner is only the first step.  Once it is identified and cleared, the spectrum must be auctioned off for use by wireless service providers.

But where do minority entrepreneurs stand in this process?

In the past, the FCC has attempted to design its auctions so that an array of service providers would have equal opportunity to acquire these resources.  To its credit, the FCC has often gone to great lengths to ensure that minority-owned businesses and disadvantaged entities were able to compete with larger, more established firms.  Yet after years of auctions, the FCC has struggled to produce tangible results in fostering diversity in spectrum access.

Where has the FCC gone wrong?

As David Grain, Founder and CEO of Grain Communications, so rightly stated at MMTC’s 2012 Broadband and Social Justice Summit, “[The FCC] can’t regulate inclusion…. One has to bring enterprise level participants together to have a unified front to press the parties to be more inclusive.”

According to Grain, for minorities, consolidation, such as the recent attempted acquisition of T-Mobile by AT&T, isn’t the problem.  Grain argued that consolidation is actually needed in order to get the economies of scale necessary in order to get the infrastructure out to the consumer.  In Grain’s mind, and that of so many others, “it’ll probably be an oligopoly market anyway…which given the issues…might not be that bad.”

At the Summit, Thomas Tauke, Verizon’s Senior Vice President for Public Policy and External Affairs, added that getting spectrum in the hands of minorities won’t necessarily do anything to improve the position for minority entrepreneurs and consumers aside from the individual holding the spectrum.   Tauke argued that getting spectrum to minority companies hasn’t been successful.  Trying to get minority entrepreneurs to be major infrastructure providers is not a good policy.  In his words, they hold it for a while and then sell it, which doesn’t help the whole.  And in most respects, he’s right.

But does that mean that there is no space for minority entrepreneurs in the (very likely) upcoming spectrum auctions?  Will the only interest that minorities have a stake in be as consumers?

I argue no.

Future auctions of new spectrum will provide numerous opportunities for the FCC to revisit how it structures these proceedings and improve upon them.  The FCC can use this opportunity to encourage greater participation of disadvantaged businesses and incorporate an ongoing diversity analysis to increase and encourage minority participation across the regulated industries.

For one, making new spectrum available for mobile wireless would help to facilitate entrepreneurship by small disadvantaged businesses, minority business enterprises, and new entrants who are underrepresented in the wireless industry.

Barriers to entry only inhibit innovation.  For example, if more unlicensed spectrum is made available, minority-owned wireless companies could have an opportunity to innovate.  These new spectrum allocations would enable increased entrepreneurship in the minority community.

In the end, with the lower costs associated with starting an online business rather than a brick and mortar business, wireless’s proven ability to bridge the digital divide, and minority communities’ interest in digital entrepreneurship, unleashing more spectrum for wireless broadband would likely spur growth in minority businesses.  This would do the most to enable minorities to have a place in this new digital ecosystem.

  • Latoya Livingston

    Latoya Livingston is a Washington, D.C.-based attorney with years of experience working in the public and private sector. Attorney Livingston joins MMTC after performing pro bono work for the organization last year.

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  • Dan

    When I think of spectrum auctions I think of a tug of war between a lot of players grabbing at a tiny (and shrinking in relation to demand) pie. And the bigger, more powerful guys (those with more money) just elbow the smaller ones out of the way. I really hope the FCC does everything they can to make sure minorities and small business owners don’t get the short end of the rope on this.

  • http://www.altondrew.com/ Alton Drew

    Ms. Livingston’s article raises two important points.  One, why is the FCC afraid of allowing a market strategy such as consolidation do the work that it is not equipped to do?  Second, why does the FCC not recognize that growth in the wireless sector does not necessarily mean having a certain number of carriers in the sector?  

    If you want wireless services produced and distributed at lower costs, you need to allow for scale whenever possible.  As wireless services improve with the additional spectrum, entrepreneurs will bring innovative products that enhance the use of wireless networks. 

    It’s okay to let the market stumble and find itself.  We can’t afford to have the FCC trying to hold the industry’s hand every step of the way.

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