Original URL: http://www.theregister.co.uk/2007/09/07/enron_with_a_g/
Cutting USS Wireless adrift
Pah - we sneer at your global economies of scale!
More dismal news for the US consumer. After the simultaneous failure of Municipal Wi-Fi projects in three major US cities - something we predicted four years ago - faster, cheaper mobile data looks further away than ever.
So why are Google lobbyists advocating for the next wave of collapsing wireless initiatives - rather than helping things?
As we reported on Wednesday, the FCC threw out a bid to have a prime chunk of 2100Mhz spectrum handed to it exclusively, free, on a plate, for 15 years. The FCC argued that it didn't have the power to grant "innovative" bids special favours, and in any case, the bid by M2Z and NetFree US wasn't innovative. (When you're a bureaucrat, you can do things like that - it's a perk of the job.)
But as Commenters at El Reg wondered, what on earth is the FCC even doing considering bids such as this? 2100Mhz, they pointed out, is the global portion of spectrum in Europe and Asia used by UMTS: the W-CDMA flavour of 3G. This is what allows you to turn off your Vodafone phone at Heathrow - turn it back on after you touchdown at Tokyo International, and continue your suspended IP session. It's very handy.
The answer is that the FCC hasn't decided what it should do with 2100Mhz yet, which is a remarkable testament to its intellectual confusion. But the answer should be fairly simple: auction it off to the highest cellular network bidder.
Thanks to spectacular regulatory mismanagement (in the 1980s, the FCC even had the bright idea of auctioning off spectrum to every Mom and Pop shop which could fill out the form) the US consumer pays too much for their basic handsets, and indirectly, too much for the service. Sprint/Nextel is plumping for 4G WiMAX in 700Mhz, Verizon is sticking with CDMA, and while AT&T and T-Mobile both have the same air interface in GSM/W-CDMA, they use different portions of the spectrum. That's four flavours of network equipment. This deprives the US of global economies of scale: instead of a fighting for a share of a 3bn market, manufacturers fight for a much smaller market of 200m.
It's why, as Reg readers pointed out, the handsets are lousy - and expensive, too.
Enron with a G?
But over at Google, the K-Street lobbyists seem to be in charge. The Silicon Valley giant needs to employ more economists perhaps, and economists who aren't religiously inclined: for its intervention on behalf of M2Z was typically short-sighted and self-interested.
Google sees itself as the Enron of spectrum. Google also sees itself as the Enron of healthcare. In one case it's bringing trading to where there is no trading, in the other, it's making the trading that's already there more efficient. And All Shall Kneel before the Church of the Algorithm!
Now there are times when liberalisation is welcome, and times - as with Enron - when it's not. This is a case where keeping the lobbyists locked in their kennels really was the Only Right Thing To Do. Alas, Googleron is attacking spectrum with the ideological fervor of the DC boys helping the post-Soviet economy: and it's going to have just as messy consequences.
Fortunately, things are a lot brighter in wireless than in fixed line - if the FCC remember one thing: data doesn't pay. (The collapse of the Muni Wi-Fi iniatives is simply the latest example). But when data is subsidized by, and bundled with something people will pay for, then the technology allows us to have really quite excellent data services as a bonus.
Earlier this month the UK operator 3, part of the global Hutchison operation, rolled out its £10 a month Turbo 3G plan for laptops (details here). This network blankets 85 per cent of the UK in "super 3G" speed data, at a price that pretty much anyone can afford. (A month's high speed data costs you two hours in Starbucks, is another way of thinking about it)
This is why the FCC should get AT&T and T-Mobile in a room, and empty their pockets. Not too much, so they're obliged to refinance huge debts and stagnate, rather than investing, as greedy European governments discovered. But enough to get a return for the public, on top of a real result.
Regulation is smoke-filled room politics - it's not science. So the FCC should start twisting some arms.
And for Google? It takes a huge mental leap today to imagine the Silicon Valley company lobbying for the telcos to be awarded this spectrum. But I don't see why not. It's the only way 300m Americans are going to be using mobile data anytime soon - and that's 300m Adsense opportunities.
If Google really cares about mobile, it should be batting for the US to join the global standard - not be creating the next wave of Wi-Fi flops, due around 2011.
Google, however, find itself trapped in a peculiarly US mythology. Forward-looking Americans always find it more attractive to strike out at a new frontier, than fix hard-to-solve problems at home - and there's few things harder than getting regulation right. So Google is the poster-child for the new frontier of "spectrum": a role it should wriggle out of as soon as it can.
That means firing some lobbyists, however - and admitting the sometimes the Algorithm is not God.
Some chance. ®