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The Radio and the Internet.Pdf The Radio and the Internet The Harvard community has made this article openly available. Please share how this access benefits you. Your story matters Citation Susan P. Crawford, The Radio and the Internet, 23 Berkeley Tech. L.J. 933 (2008). Published Version http://scholarship.law.berkeley.edu/btlj/vol23/iss2/5/ Citable link http://nrs.harvard.edu/urn-3:HUL.InstRepos:12942311 Terms of Use This article was downloaded from Harvard University’s DASH repository, and is made available under the terms and conditions applicable to Open Access Policy Articles, as set forth at http:// nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of- use#OAP Berkeley Technology Law Journal Volume 23 Article 5 Issue 2 Spring March 2008 The Radio and the Internet Susan P. Crawford Follow this and additional works at: http://scholarship.law.berkeley.edu/btlj Recommended Citation Susan P. Crawford, The Radio and the Internet, 23 Berkeley Tech. L.J. 933 (2008). Available at: http://scholarship.law.berkeley.edu/btlj/vol23/iss2/5 This Article is brought to you for free and open access by the Law Journals and Related Materials at Berkeley Law Scholarship Repository. It has been accepted for inclusion in Berkeley Technology Law Journal by an authorized administrator of Berkeley Law Scholarship Repository. For more information, please contact [email protected]. THE RADIO AND THE INTERNET By Susan P. Cranford' TABLE OF CONTENTS I. IN T R O D U C T IO N .................................................................................... 934 II. EARLY RADIO REGULATION ............................................................ 943 III. CONVERGENCE AND (LACK OF) COMPETITION ....................... 947 A. MODELS OF INTERNET ACCESS: HISTORY .......................................... 947 B . W IRELESS CARRIERS .......................................................................... 952 C . THE INTERNET M ODEL ....................................................................... 953 D. NATURE OF THE MARKETPLACE ......................................................... 956 E. RISKS OF THE INTERNET MODEL ........................................................ 960 IV . THE 700 M H Z AUCTIO N ...................................................................... 961 A. THE STORY BEHIND THE AUCTION ..................................................... 961 1. The Broadcastersand Their Spectrum ........................................ 961 2. The Subject of the Auction .......................................................... 963 3. The Statutory Scheme and the Band Plan ................................... 965 B . K EY PERSPECTIVES ............................................................................. 969 1. FCC: The Purpose of the Auction ............................................... 969 2. Congress'sBudgetary Needs ...................................................... 973 3. Access Entrants'Needs ............................................................... 974 4. Incum bents'Needs ...................................................................... 979 V. THE COMMISSION RESPONDS ......................................................... 983 A. THE 700 MHz AUCTION RULES .......................................................... 983 1. C Block Locking and Blocking Rules .......................................... 983 2. N o W holesale A ccess .................................................................. 984 3. A nonym ous Bidding .................................................................... 985 4. P ackage B idding ......................................................................... 986 5. R eserve P rices............................................................................. 987 6. Public Safety Network ................................................................. 987 B . T HE R ESPON SE .................................................................................... 990 © 2008 Susan P. Crawford. t Visiting Professor, Yale Law School (Spring 2008); Professor, University of Michigan Law School (as of July 2008). Thanks to Wharton workshop participants Gerry Faulhaber, Eric Goldman, Ellen Goodman, Chris Marsden, Andrea Matwyshyn, Monroe Price, Howard Shelanski, Kevin Werbach, Richard Whitt, Christopher Yoo; thanks to Jessica Litman, Margaret Jane Radin, Rebecca Eisenberg, and University of Michigan students in the Intellectual Property Workshop, Fall 2007; thanks also to Steve Schultze and Stewart Sterk. BERKELEY TECHNOLOGY LAW JOURNAL [Vol. 23:933 C. COMPARISON TO 1920S SPECTRUM POLICY ....................................... 991 VI. SPECTRUM AND THE PUBLIC INTEREST ..................................... 994 A. THE PUBLIC INTEREST IN SPECTRUM AUCTIONS ................................ 995 B. ONW ARD: W HITE SPACES ................................................................. 1000 V II. C O N C LU SIO N ....................................................................................... 1006 I. INTRODUCTION During the summer of 2007, a brawl erupted at the Federal Communi- cations Commission (FCC) and in Congress over what rules should apply to an auction of licenses to use a narrow swath of electromagnetic spec- trum. The auction, which took place in January 2008, allocated commer- cial wireless licenses for spectrum in the 700 MHz band that is being va- cated as a result of the nation's transition to digital television. This spec- trum was considered highly valuable "beachfront property" because it al- lows for the transmission of signals through objects and over long dis- tances (and thus requires a fraction of the number of cellular towers that are necessary for the use of higher frequencies). Indeed, because the auc- tion was likely to reap $20 billion in revenue for the U.S. Treasury, con- gressional interest was high. All of the current players in the communica- tions industry were involved in the fight, making strong arguments about the conditions under which this spectrum should be licensed. The size of the spectrum licenses (local, regional, or national?), the business model of the licensee (wholesale, open access or retail, discriminatory access?), and the obligations of the licensee to public safety officials (build a network for public safety, or make some services available at a low price?) were subjects of extensive commentary. Reports about this auction (the "700 MHz auction"), which was probably the last competitive auction for a substantial amount of spectrum for the next few decades,1 prompted a vigorous debate in the press and the blogosphere about the goals and expectations of U.S. communications pol- icy. Opponents of license conditions typically focused on the revenue to be gathered through the auction, and argued that any limitation on what could be done by licensees would diminish the market value of these li- 1. At the open Commission meeting during which the 700 MHz auction rules were announced, Commissioner McDowell described the proceeding as the "auction of the century." In re Serv. Rules for the 698-746, 747-762 & 777-792 MHz Bands, 22 F.C.C.R. 15289, 15571 (Aug. 10, 2007) (second report and order) [hereinafter Second Report and Order] (statement of Commissioner Robert M. McDowell, dissenting in part). The 700 MHz auction took place because digital television was forcing the release of spectrum; no other large auctions of spectrum are currently planned. See generally infra Part IV. 20081 THE RADIO AND THE INTERNET censes.2 Defenders of license conditions made different points. Many ar- gued that the market for wireless highspeed Internet access 3 was highly concentrated, and that license conditions requiring licensees to make transport services available on an open4 wholesale basis could spark addi- tional competition. 5 For example, the Los Angeles Times said in an edito- 2. See, e.g., Letter from Robert W. Quinn, Jr., AT&T, to Marlene H. Dortch, Sec'y, FCC (July 12, 2007) (ex parte communication regarding In re Serv. Rules for the 698-746, 747-762 & 777-792 MHz Bands, WT Docket No. 06-150) (on file with author) (stating that "open access" conditions on auction would "deprive taxpayers of billions of dollars"); see also Kim Hart, FCC Majority Backs Open-Access Plan for Airwaves, WASH. POST, July 25, 2007, at D2 (noting Republican congressional representatives are unhappy with conditions on licenses because of possibly adverse effect on auction reve- nues). 3. The FCC defines "broadband" as anything over 200 Kbps; I use the term "high- speed to describe the same range of speeds. The word "broadband" is loaded with asso- ciations that are used to answer policy questions rather than add precision. See Susan P. Crawford, What Is Broadband Good For? (May 17, 2007) (unpublished manuscript, on file with author) (explaining difference between "broadband" and "highspeed access"). 4. Comments of Consumer Federation of America, Consumers Union, & Free Press, In re Broadband Industry Practices, WC Docket No. 07-52, at 140 (Fed. Commc'ns Comm'n June 15, 2007), available at http://fjallfoss.fcc.gov/prod/ecfs/retrieve.cgi? nativeor_pdf=pdf&iddocument=6519529519 [hereinafter CFA Comments]. The Con- sumer Federation of America (CFA) and their co-signers of the Comment to the FCC stated that: Open access simply means that the licensee sells access to the network on a wholesale basis at commercial rates. Any number of ISPs that choose to do so may come and buy bandwidth and compete for cus- tomers. Everyone shares the same transmitter and connectivity; they compete on customer service and
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