The FCC’s Proposal For A Free Nationwide Wireless Network

MS. DIANE REHM

10:06:55
Thanks for joining us. I'm Diane Rehm. More than 35 million Americans are living without broadband Internet access. Now, the Federal Communications Commission is proposing a free nationwide wireless network that would be powerful and wide-ranging. But it faces opposition from telecom companies who say those airwaves should be sold for licenses with the money going to the U.S. Treasury.

MS. DIANE REHM

10:07:27
Joining me in the studio to talk about the pros and cons of public Wi-Fi: Scott Cleland of the Precursor Group and Todd Shields of Bloomberg News. Joining us from NPR's New York City bureau: Susan Crawford of Cardozo School of Law. I do invite you to be part of the program. Give us a call, 800-433-8850. Send us your email to drshow@wamu.org. Follow us on Facebook or Twitter. Good morning, everyone.

MR. TODD SHIELDS

10:08:06
Good morning.

MR. SCOTT CLELAND

10:08:07
Good morning.

PROF. SUSAN CRAWFORD

10:08:07
Good morning.

REHM

10:08:08
Todd Shields, I'll start with you. Talk about what the FCC is actually proposing.

SHIELDS

10:08:16
This is an interesting process, and it's the first time it's been tried. The FCC is going to take -- invite television stations to offer the airwaves that the stations are using today for auction, use part of the proceed to compensate the TV stations and use the airwaves freed in two ways. One way is to offer them in another auction to wireless companies such as AT&T, Verizon, Sprint and T-Mobile for use in traditional mobile plans that we all know about, and the other way is to offer a slice of the airwaves for so-called unlicensed use or use where people can put up gadgets and not charge the user.

REHM

10:09:01
How and why did the FCC come to this conclusion or this route?

SHIELDS

10:09:08
The FCC refers to this as a balanced spectrum policy where some of the airwaves are used in a traditional model that we know, which has its strengths, that companies can have quality assurance. They know how to run a network very well. But the FCC hopes that innovators come in to create, frankly, who knows what. It's a whole ecosystem that could develop once the airwaves are available, and companies such as Google and Microsoft are quite interested in pushing this proposal as far as they and their engineers can.

REHM

10:09:38
Yeah. I want to get to Google in just a moment. Susan Crawford, how beneficial do you think this approach might be for consumers?

CRAWFORD

10:09:51
Well, Wi-Fi is a way to share a wire coming into a home or business. So you just sort of imagine that wire is a garden hose carrying water, reaches to your room, and then the wireless hotspot is like a shower head. It's diffusing connectivity in a gentle mist around your home. Americans are already relying on Wi-Fi for their income connections and in their homes and businesses, which is 80 percent of time where we're using wireless devices.

CRAWFORD

10:10:18
What's interesting about this suggestion by the FCC is they want to make available a narrow band, as Todd said, of spectrum at a lower frequency than what we have available to us right now for Wi-Fi. Here's the consequences of that. It means it would be cheaper to run a wireless network because you built fewer towers at lower frequencies. It isn't actually free. Someone still has to build a tower, you know, make sure it's fed by fiber. But one input is it would be free, and that's the spectrum itself that people use to communicate.

REHM

10:10:54
Scott Cleland, how might that affect quality?

CLELAND

10:10:59
Well, Wi-Fi, as we all know, like when you go do a tech conference and, well, you know, several hundred people are using it or just even dozens, it doesn't work very well. And so, you know, Wi-Fi, you need a lot of bandwidth and then you, hopefully, will have a lot of hotspots. And so the problem with Wi-Fi and this idea of doing a nationwide network is it's very, very complicated. And if you do it for free, you're going to attract a lot of people. And so it'll probably be a lower quality, less reliable, slower speed national network.

REHM

10:11:34
Step back and explain spectrum and what it means for us.

CLELAND

10:11:42
Well, spectrum is the most valuable natural resource there is. It's radio spectrum. And right now, we're on 88.5. That's a frequency. And there is a wide swath of frequency. At the very lowest frequency, you would have -- that's how submarines can communicate when they're, you know, two miles under the ocean.

CLELAND

10:11:59
That's a very powerful signal, and then you move up to where you have AM radio. When you have TV, then you have cellular at 700 megahertz. You go up to Wi-Fi, which is at 2.4 gigahertz, and then there's also some Wi-Fi at 5.7. And so what spectrum is is a way to electromagnetically transmit signals. That's what spectrum is.

REHM

10:12:25
So how do you believe that the FCC's proposal might or could affect this so-called digital divide that clearly now exist between some who have access and some who have not?

CLELAND

10:12:46
Well, let's put this in perspective. You know, we have the most competitive market in the United States of anywhere, and we've gotten 68 percent of Americans with broadband in the shortest time any service has been adopted. And we also are the fourth lowest broadband price in the world according to the ITU.

CLELAND

10:13:03
And, like, for wireless right now, we -- it's four cents a minute on average. That's four times better than you have in Europe, six times better than you have in Japan, and we also have the fastest wireless LTE. It's -- we're two to three years ahead of Europe on this.

REHM

10:13:22
So from your perspective, 68 percent already have Wi-Fi available to them. What about the other third?

CLELAND

10:13:34
Well, let's, you know, parse that down in the sense that 98 percent of Americans do now have availability of broadband if they want it, and 80 percent, according to the FCC chairman, have 100 megabits of speed available to them. Now, you know, all of us that are online can't imagine living without it. Well, there's a lot of people that don't. Just like when we had universal telephone service, it was only 93, 94 percent at the max. So there were five or 6 percent Americans that didn't want a wire-line phone.

CLELAND

10:14:05
There will be some portion that don't want a computer. You know, some of the older folks that didn't raise up -- didn't grow up during the computer revolution don't see the need or the purpose of it. So there will always be a segment of Americans that choose, for one reason or another, that they don't need it or don't want it.

REHM

10:14:22
Todd Shields?

SHIELDS

10:14:23
Well, there is also a portion that can't afford it. My child went to a public high school and spoke of children writing term papers using smartphones. Now, they've got wireless connectivity but not wired in the home. And when the FCC looked at who has wired access in the home, wired broadband, they came up, in 2010, with 100 million Americans without it although there was 95 percent availability. So there are barriers to people getting access to it.

SHIELDS

10:14:50
And as we all know, employers, schools, it's more and more in demand. So some people would say, among them Susan Crawford, I believe, that it's a serious public policy issue getting this out to more people.

REHM

10:15:01
Susan.

CRAWFORD

10:15:03
Well, Todd's absolutely right. We need to make sure that more people have wired access at home. But people don't want to rely on just a smartphone. More than 80 percent of people who have smartphone access also have a wired connection at home. And the people who are relying on only-smartphone access are two times more likely to be minorities, 2 1/2 times more likely to be very low income among the general smartphone population.

CRAWFORD

10:15:31
The Wall Street Journal just did a wonderful story on the front page last week from Citronelle, Ala. about kids doing their homework at McDonald's. So, you know, improving Wi-Fi access is definitely a benefit, so as we're moving around the city, we can keep in touch with people. It is no substitute for a wired connection at home.

REHM

10:15:51
Here's an -- a posting on Facebook from Benedict, who says, "So -- now let me get this straight. While the rest of the developed world has 100 megabytes standard for about $15 or less a month, we get stuck with service and a giant monopoly. Now this monopoly is feeling threatened because the government believes that the Internet is a human right and is going to drive down the prices for many service providers." "I say," says Benedict, "rock on." How do you respond, Scott?

SHIELDS

10:16:35
Well, with all due respect, they're totally wrong on their facts and -- because the rest of the world doesn't have 100 megabits. They're -- he might be talking about Korea, but...

REHM

10:16:47
South Korea.

SHIELDS

10:16:48
You know, South Korea. But, you know, let's remember we also don't have monopolies in the sense that AT&T, of its voice business, it's lost 60 percent of its customers. Comcast in cable has lost 50 percent of its customers. You know, 40 percent use DBS and Cable. Voice is an app today. It is not a monopoly service. So when people talk about monopolies, this is something that, you know, people that are looking backwards and haven't looked at what they see in the future. I mean, just look at the airwaves and watch how many times everybody is advertising to buy wireless service.

REHM

10:17:22
Susan, your new book, "Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age," does talk about the monopoly power of the big companies.

CRAWFORD

10:17:39
That's right. And today, your show is talking about one separate market within that, which is wireless. And Todd has put this in good perspective. The commission is moving from broadcast to data, so moving people who had broadcast spectrum over to data in low-frequency spectrum, this stuff that is so important because you built fewer towers. AT&T and Verizon have a lock. They have four-fifths of the available low-frequency spectrum under one gigahertz. And so, of course, they want to make sure that there isn't use by a competitor within that lower frequency area. They have it all.

REHM

10:18:16
Todd.

SHIELDS

10:18:17
There's a couple of interesting wrinkles to this. And if I could go back to the low-frequency aspect we've mentioned a few times, without being technical, about it, we all have had the experience or many of us have gotten the TV set with an antenna. The airwaves go right through the building and right to the TV in the den so it works really well to penetrate. It goes far.

REHM

10:18:36
Todd Shields, he is a reporter for Bloomberg News. We'll take just a short break here. When we come back, more about the FCC and free Wi-Fi when we come back.

REHM

10:20:04
Welcome back. We are talking about the FCC's proposal to provide free Wi-Fi across the country. Here in the studio: Scott Cleland, president of Precursor LLC. That's a research consultancy for Fortune 500 companies. He's also chair of NetCompetition, a pro-competition e-forum supported by broadband companies. Todd Shields is a reporter for Bloomberg News.

REHM

10:20:43
And joining us from NPR in New York City: Susan Crawford. She is a professor at the Cardozo Law School. She's also author of a new book. It's titled "Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age." Susan Crawford, you've just come back from South Korea. Tell us how different the system is there from what we have here.

CRAWFORD

10:21:22
Well, again, Wi-Fi, the subject of today's program is just a way of sharing a wire. So in Seoul, they've got fiber in the subways, and that allows people riding the subway to actually watch TV on their wireless devices because that garden hose coming into the subway is full of so much capacity. That subway line fiber also allows many, many competitors to provide their lines into people's apartments.

CRAWFORD

10:21:50
So in Seoul, you've got three choices of fiber providers, and they're competitive. And it's 30 bucks a month to get that service. So connectivity in South Korea is just a given. It's an input into a business that no one thinks about.

REHM

10:22:05
So, Scott Cleland, what's wrong with the idea of a free public wireless network?

CLELAND

10:22:14
Well, you know, when anything sounds too good to be true, it is. I mean, because as Susan had said, it's not free. You know, spectrum may be free, but it's an input that is maybe, you know, 10 to 20 percent of the overall cost. Over the last 15 years, the broadband industry has invested $1.2 trillion in their infrastructure networks.

CLELAND

10:22:35
Let's repeat that, $1.2 trillion, so $1 trillion in non-spectrum spending. It's not trivial. So, you know, I think that they're going to have a very hard time providing a good service when you basically are going to try and do it on the cheap because you get what you pay for.

REHM

10:22:51
But how much have they made in return?

CLELAND

10:22:55
Oh, I think, you know, they have earned a return, you know, for the telecom industry.

REHM

10:23:00
Sure.

CLELAND

10:23:01
And that's what a market system does. You know, how does -- how can you afford to invest $1 trillion unless you have a return on investment? And so that's not -- there's nothing wrong with, you know, competitive market. That's what our economy is based on. The one thing I need to add on South Korea -- I was in South Korea last fall as well. And what people need to know about South Korea is most people live in Seoul, and most people in Seoul live in apartment buildings. So it's much easier and much cheaper to wire South Korea.

CLELAND

10:23:31
The United States is a big country. It's spread around. And when they talk about nationwide free Wi-Fi network, they just don't understand physics. I mean, the problem with doing this in anything that's more suburban or urban is Wi-Fi is very short-range. And the signal they're talking about of getting this new FCC spectrum is, like, six megahertz or smaller.

CLELAND

10:23:54
The most you can do with that is five megabits. And that's going to be shared with hundreds and hundreds or maybe thousands of people. So, you know, there's a lot of kind of fantastical kind of assumptions that are being made here. If you could wave a magic wand and it could be for free, that's like, you know, could everybody have free gas? Well, I don't think so.

REHM

10:24:13
Todd Shields.

SHIELDS

10:24:14
Oh, I think to be fair, though, the FCC is not proposing that it establish and run a network free to all comers. I think the way to think of this is it'll be a -- an alternative or supplementary use to traditional wireless plans. It will be out there. It will be in the air as it were. Folks can use it to the extent that it's available, but there's nobody running the network per se. There are people setting it up, but there's no traffic management. So you'll be able to use it when you can. Sometimes you'll have to go back to your regular plan.

REHM

10:24:42
Todd, can you compare or contrast what we're talking about here, the creation of a free Wi-Fi network to the creation of a system of roads and highways in this country?

SHIELDS

10:25:04
That's an interesting analogy. It would be, yes, establishing something of a utility. On of the FCC's aims here is to have blocks of this Wi-Fi available in every city, including major cities. Once you have New York, L.A., Chicago, where it's available there, then it becomes an attractive audience to developers. And so put the road up, see who comes on it seems to be the attitude.

REHM

10:25:23
So where is it now, Susan?

CRAWFORD

10:25:28
Well, right now, Wi-Fi is ubiquitous across the country. People use it all the time. And by the way, Verizon and AT&T, a third of their traffic is carried on free Wi-Fi. So they trust this. It saves them a lot of money. They don't have to build the towers. So this would be very useful in urban areas that -- where the higher frequency Wi-Fi is getting a little congested and also very helpful in rural areas, where new entrance -- they're called WISP, wireless Internet service providers -- could show up and assume that the spectrum they use is available to them and just spend the money on towers and fiber.

REHM

10:26:04
But, Susan, how do you respond to Scott, who talks about the money invested? Why shouldn't the federal government try to make money for itself by selling some of the spectrum instead of giving it away for free?

CRAWFORD

10:26:25
Well, this is part of an auction that's going to be hundreds of megabits wide, potentially. It depends what the broadcaster's willing to contribute to the pool. So just maybe 12 megahertz of that will be assigned to unlicensed. Everything else will be sold. And the Congressional Budget Office is assuming about $24 billion from the sale even assuming the unlicensed little chunk. Since 2002, the FCC has been saying we need a balanced spectrum policy, and this is part of that story.

REHM

10:26:53
Scott.

CLELAND

10:26:55
Well, I -- the important thing here is to, you know, obey law. And I think when you're seeing -- you're hearing concerns out there is that the law of the land for the last 20 years is that spectrum should be auctioned. And that's because in the past, it was given away. It made billionaires. And it's a public resource. It's a taxpayer resource. When we have $1 trillion deficit, it's one of the most valuable things that we can sell in order to lower the deficit.

REHM

10:27:21
But how about this balanced approach?

CLELAND

10:27:24
Well, when you say balanced, we already have 150 megahertz at 5.7, another 100 megahertz at 2.4. You know, it isn't like we don't have a lot of Wi-Fi available. The big problem here, if they're -- if you want to know what the wireless problem is, the government's hoarding spectrum. Only 15 percent of the nation's spectrum that's really good and useful is used by the private sector. Now, when you put that into context, it's amazing that only 30 percent of the land is controlled by government but 85 percent of the spectrum on energy use.

CLELAND

10:27:56
Less than 1 percent of energy use is government, yet they want 85 percent of the spectrum. So we could solve all of these problems when -- they're talking about 12 megahertz for Wi-Fi and whatever is. We need the government to stop hoarding and mismanaging a dysfunctional spectrum management system. If they got more spectrum into the private sector, we wouldn't have any of these problems or discussions.

REHM

10:28:20
Todd Shields.

SHIELDS

10:28:21
To Scott's point, moving the government agencies off spectrum that they're using is an enormously complicated problem and one that the Obama administration has attempted to grapple with by offering proposals to share airwaves, to use, for instance, airwaves used occasionally to control a lock-gate but not in every season and perhaps use those for other purposes when the Army Corps of Engineers isn't using them may be one example.

SHIELDS

10:28:44
So -- but that's very complicated than the wireless companies. AT&T and Verizon make no bones about it. They prefer exclusive use of the airwaves. So that's one ongoing, complicated puzzle that policymakers and companies are grappling with here in Washington right now.

REHM

10:28:57
Susan Crawford.

CRAWFORD

10:28:59
Federal law says that one of the public -- that the public interest has to be considered when the FCC is making these rules, and, in fact, the statute says, may not base its public interest finding solely or predominantly on the expectation of federal revenues. We've got to have this idea that making nomadic wireless available widely is helpful to the public.

CRAWFORD

10:29:20
And it has brought billions of dollars to the economy already. The existing Wi-Fi spurred a huge ecosystem of new devices. Everything we do with our laptops is riding on top of that Wi-Fi. We're going to have many more devices with this new stuff.

REHM

10:29:35
Susan, how would you respond to Scott's point that these free networks would be noisy, would be messy, would not necessarily give us what we need in terms of clear communication?

CRAWFORD

10:29:54
Well, a couple of answers. First of all, compared to what? If you can't get online at all, a little bit of air is going to help you a lot. And also, we're relying on these things already all the time, and interference has not been an issue. We're using -- Verizon and AT&T, as I just said, use them all the time. Every time you go to an office, you're using it. Again, it's just a way to share a wire. What we really need are more wires and more towers and more infrastructure for America. AT&T and Verizon have plenty of spectrum.

REHM

10:30:24
Scott.

CLELAND

10:30:25
You know, we have about 135 Wi-Fi hot spots right now, one of the highest amount in the world. You know, there are more wires. We're the only nation in the world that has a second ubiquitous wire line network called cable. We're the only nation in the world that has an unconcentrated four competitive wireless providers. They're nationally ubiquitously available. We have seven regional providers that provide service to four million or more.

CLELAND

10:30:55
We have two direct-broadcast satellite broadband providers. As a nation, our competition policy has produced more competitive alternatives. Is it perfect? No. Is it better than the alternative of a government-run system or a heavily regulated system? You bet you. Just look at every other nation in the world, and like in Europe, they don't have fiber deployment. They're three years behind us on 4G LTE because there's no market incentive for them to invest the billions.

REHM

10:31:22
Todd.

SHIELDS

10:31:23
There are some questions about the competitive landscape that Scott describes. There are four major nationwide wireless carriers, yet the FCC, under Chairman Julius Genachowski, for several years has declined to declare the wireless market competitive, saying that it's dominated by two large firms. And as far as cable, Susan, I'm sure, addressed whether cable has so-called local monopolies.

REHM

10:31:49
Susan.

CRAWFORD

10:31:50
So 94 percent of new broadband subscriptions are going to the local cable monopoly right now. People are fleeing DSL, and Verizon FiOS isn't really putting much pressure on cable. So we have two extraordinarily concentrated markets, one where AT&T and Verizon on the wireless side had a huge lead in spectrum holdings, customers and everything else. And T-Mobile, by the way, has more towers, but less good coverage because it only has access to high-frequency spectrum.

REHM

10:32:18
Scott.

CRAWFORD

10:32:18
On the wired side -- yeah.

REHM

10:32:20
Scott.

CLELAND

10:32:20
And that's, once again, selective facts because if you look at how many wireless subscribers use someone other than AT&T and Verizon, it is more -- you know, there's a third that use somebody other than AT&T or Verizon. It -- you know, people have choice. People change their broadband provider. One out of six people every year change it. It's a competitive marketplace.

REHM

10:32:45
Scott Cleland, he's president of Precursor LLC. And you're listening to "The Diane Rehm Show." Going to open the phones now, 800-433-8850, first to Raleigh, N.C. Good morning, Brian.

BRIAN

10:33:06
Hi. I've been listening to Scott with his arguments against this plan. One is he keeps calling the $1 trillion-plus that the telecoms have spent. I think he's confusing the fact of how much money they spent for a commercial company telecom support versus public communication. Also with the competitiveness, in any cable market, the cable companies don't compete with each other. You don't find markets or you very rarely find markets where Cablevision competes with Time Warner or Time Warner competes with Comcast.

BRIAN

10:33:45
And then the telecom market, you can talk about all the wireless communications companies you want, but there's really only two. And there may be a lot of others that people can buy service from, but those companies backhaul all their traffic on these other two major carriers. Their competitiveness here is, in the United States, is lagging so far behind Europe, Korea, Japan. The lady that's been talking is absolutely correct. When I travel to Europe -- I travel to Japan, I travel to Korea -- it's all shameful to see what you get for $30, $40 a month.

REHM

10:34:20
All right. Scott.

CLELAND

10:34:21
What we're arguing about is whether we have facilities-based competition or resale competition. And basically in Europe, what they have is a monopoly system where they want the monopoly to be resold. Over there, they're now having to talk about consolidation in Europe because they won't -- you know, basically, they don't have enough money to invest in fiber to catch up with the United States or Seoul or South Korea, and they don't -- they're two to three years behind us in 4G LTE wireless.

REHM

10:34:51
Tom Shields.

SHIELDS

10:34:53
If I'm not mistaken, the monopoly resold aspect in Europe is the old state-run telecommunication systems that they then, by regulation, say you -- the guys who have this network that went everywhere in the 1980s and '90s -- now need to let other companies come in, new entrants come in and use your wires to reach the homes. The FCC took a brief look at this on its way to writing a national broadband plan and seems to have dropped it quickly amid some alarm from the big companies.

REHM

10:35:18
All right. To Orlando, Fla. Good morning, John.

JOHN

10:35:23
Hey. Good morning, panel. My name's John. I'm a radio engineer down here in Orlando. I'm very intrigued by your conversation this morning. I just want to say a couple of things. One, the spectrum that we have for Wi-Fi is extremely limited, and the more people you put on there, the worse it gets. Additionally, you're going to have to maintain the network. Components degrade. Many components come from factories out of the box bad.

JOHN

10:35:46
So this fallacy that we're going to have a network that does not need maintaining is just not true. And additionally, what this is going to do, I mean, look at the ISPs now who make their living on providing Internet service. This is just going to chunk into their profits and provide a lower quality service at the consumer base across the country. I want to hear how the panel feels about that. Thank you.

REHM

10:36:08
Susan.

CRAWFORD

10:36:09
Well, competition is a public interest, too, and if this puts a little pressure on Verizon and AT&T, so much the better. You know, we've got this completely broken market structure with absolute control on the wired side by the local cable guys and absolute control on the wireless side by AT&T and Verizon. This is just a little nudge at making sure that we get a little bit additional Wi-Fi connectivity. It actually doesn't address the underlying market dynamics.

REHM

10:36:32
Tom.

SHIELDS

10:36:32
On the point of would anybody maintain the network, well, who knows? The FCC sets up the spectrum and, if you will, establishes the garden, and companies want to try to plow it, including Microsoft.

CRAWFORD

10:36:41
Right.

SHIELDS

10:36:41
So I don't know what plans they have, but maybe they have good plans.

REHM

10:36:44
But what about traffic? What about too many in one place?

CLELAND

10:36:50
Oh, that's a great question because how does a broadband provider provide quality service, and how do they make sure a voice call goes through that's something that's real time, that it gets done and gets done with reliability? It's because networks need -- even broadband Internet networks need to be managed.

CLELAND

10:37:06
You need handle of traffic that's coming through that's not immediate need, or real-time service can be put just one step behind immediate need. And so, you know, there are peak usage. Networks are not, you know, homogenized, and they happen in bursts. And without some management at some level, you can't do it.

REHM

10:37:26
All right. We'll talk more about management, take more of your calls when we come back. Short break and right back.

REHM

10:40:04
And welcome back. As we talk about the FCC's proposal to provide more free Wi-Fi across the country, Susan Crawford, would you be good enough to talk about the free public Wi-Fi in Chelsea, New York City?

CRAWFORD

10:40:27
So again, because Wi-Fi is a way of sharing a wire, if you own a wire, control it, you can let lots of people share it, and Google has decided to help the city of New York with that on the west side of New York. And the idea is when you're strolling on the high line, you can flip open your laptop and maybe check email.

CRAWFORD

10:40:46
You won't be able to take a course from MIT, but you can keep in touch. And lots of cities are doing this, making sure that there is a cloud of connectivity. Again, it's a compliment, it's an addition to the need for wires in the city, and it makes the city a more livable place.

REHM

10:41:02
Why has Google gotten into this?

CRAWFORD

10:41:06
You know the more people online, the better for Google. And it also wants, I'm sure, to be a good corporate citizen. It has a huge installation here in New York and wants to maintain good relationships. This feels like a positive benefit. It's like opening a park except it's opening an area for people to communicate in.

REHM

10:41:24
Todd.

SHIELDS

10:41:25
Yeah. I've not followed the Google example closely. We mentioned during the break it's interesting the political battles around this. When the auction happens, perhaps next year -- that's the goal -- the question is, and we've been talking about it most of this program is, what do you do with the airwaves that are yielded, taken away from TV or relinquished by television and voluntarily relinquished to be redundant and offered for wireless use?

SHIELDS

10:41:51
And the argument is, how much -- part of the argument is, how much of those airwaves do you devote to the Wi-Fi-like uses? And they have to fight on Capitol Hill about it. It's drawn notice from some of the Republican lawmakers who said that by -- if the FCC devotes too much of the airwaves to the free uses, the Wi-Fi-like uses, it could forego as much as 19 -- 1-9 -- 19 billion in revenue for the U.S. Treasury.

REHM

10:42:13
Scott.

CLELAND

10:42:14
On mentioning Google, it's really important to talk about that and also about government. You know, can anybody compete with the government? No. They print money. Can anybody compete if the federal government stands on the scales and picks winners and losers? No, you can't compete with that. And that's one of the big concerns here is that Google wants free Wi-Fi because they have an ad-based model.

CLELAND

10:42:34
And they also are, you know, the search advertising, you know, monopoly in that space. So, of course, they would like the government to subsidize their business. Now, they have $50 billion in cash. They can easily afford to buy spectrum to offer their service, but they would like the government and the taxpayer to subsidize their largess.

REHM

10:42:56
Todd.

SHIELDS

10:42:57
Well, the government always picks winners and losers. It would do so by just extending the status quo. It would do so by passing new regulations. So there's discussion about what the government should do, but I don't know if it's very helpful to talk about whatever they do in terms of picking winners and losers if it's an outcome not desired by you.

REHM

10:43:13
Let's go to Fort Worth, Texas. Hi, Stacey.

STACEY

10:43:18
Oh, good morning, Diane.

REHM

10:43:20
Good morning.

STACEY

10:43:21
I just wanted to make a comment. First of all, I love what you guys are talking about. I know that in our household, we consider Wi-Fi a necessity -- a necessary expense. But I wanted to go back one step backward and talk about how since broadcast television has turned digital, we forget that a lot of low-income people cannot -- they do not have digital television. They still have analog television. And they have to buy a special converter to get what used to be free, you know, basic PBS and the regular channels.

STACEY

10:43:57
And I work for a local TV station here in the Dallas-Fort Worth area, and we fielded a lot of the calls to help people make their conversions. And what we heard over and over again was they can't afford to buy these new converters or a new TV because they're on fixed income. And if you try and get cable television, it's, you know, $15, $20 or more to get that free television.

REHM

10:44:18
Sure.

STACEY

10:44:19
And that was just my comment that we're talking about Wi-Fi, and people still can't even get free television.

REHM

10:44:26
Scott.

CLELAND

10:44:27
You know, one of the dilemmas is that, you know, a lot of people use cable TV or DBS. The others, you know, cannot. If you want to have universal service as a policy and you want everyone to have access, which is a noble goal -- it's been a hundred year goal for phone -- what the best thing to do is to target that onto the people that can afford it and make sure that they can afford it, so that, you know, if the Congress wants to subsidize it, they can. That's a legitimate use of tax dollars, and Congress is the one that should decide it. It shouldn't necessarily be five unelected bureaucrats at the FCC to decide it.

REHM

10:45:07
Todd.

SHIELDS

10:45:09
To the question of subsidies, you know, Congress in the Obama administration did do this at the digital transition, the digital TV transition that the caller referenced, and they did come up with a subsidy program for people to buy the gear they need to convert. Now, clearly it hasn't reached everybody because the caller tells us she's got people in her area for whom it doesn't work.

SHIELDS

10:45:28
We got a digital converter box, and sadly, it didn't work. And I could no longer get my free over-the-air broadcast TV at my home. So there are people who get cut off that way, and I'm sure not all of them have clambered back into the boat.

REHM

10:45:39
Here's an email from Ed and Mary Ann, who say, "I take talking about people especially older people "choosing" not to have high-speed connectivity or even computers. Sometimes, there is no choice. We live in a rural area of southeastern West Virginia where availability of high-speed Internet, whether cable, optic fiber or even DSL, is very spotty. As an example, we have neighbors less than a mile away that have high speed, but we simply cannot get it in spite of many calls to the area provider." How do you respond, Scott?

CLELAND

10:46:32
Well, it is exceedingly difficult to reach some areas. In some areas, you'd recommend satellite. But even satellite can't get -- if you're on the wrong side of the mountain, you can't get satellite. But when somebody lives very, very far away, it can be very expensive. Like in voice, when we used to provide service in Alaska, it might've cost $100,000 to serve a family.

REHM

10:46:53
So how could this FCC plan affect that, Scott?

CLELAND

10:46:59
The -- for the free Wi-Fi in far rural areas, I'm not sure. Maybe Susan knows more about the technology. The FCC is directing a subsidy to try to extend wire broadband to -- throughout the country. That's ongoing.

REHM

10:47:13
Susan.

CRAWFORD

10:47:14
So we've got this issue that 19 million Americans can't get access to wired access at any costs. So perhaps in some of those areas, these wireless Internet service providers, the WISPs, could use this free, unlicensed spectrum as an input into their business. They still have to build the towers, and they still need wires. You can't do this without a wire. But it would make more sense for them as a business with the spectrum in hand.

REHM

10:47:37
All right. To Laramie, Wyo. Good morning, Brett.

MR. BRET GLASS

10:47:41
Yes. My name is Brett Glass. I'm calling from Laramie, Wyo., and I am one of the WISPs that Susan just mentioned. As a matter of fact, as far as I know, I was the world's first. I have been doing it for 21 years. And I serve rural areas which no one else serves. I'm working to bring Internet out to new areas where -- which no one -- which have never had broadband before except maybe by satellite.

MR. BRET GLASS

10:48:04
Now, what I find interesting about this show -- and the reason why I was so eager to call in -- is that I saw The Washington Post article, and I think that the reporter was a bit confused about what's going on. The FCC doesn't have the authority to just give you free Internet service. It is not in the business establishing nationwide networks, and it probably never will be.

MR. BRET GLASS

10:48:26
There are three separate things going on at the FCC. One is the so-called incentive options in spectrum where they're getting broadcasters to give up their spectrum and they're going to auction -- they're going to auction off that spectrum to various companies that want to bid on it. There's the so-called TV white spaces which are gaps between TV channels, which they intend to be available for unlicensed use.

MR. BRET GLASS

10:48:47
And then there is a third one, which is going to extend the Wi-Fi band at five gigahertz up farther. Now, all of these are good things. More licensed spectrum is good. More unlicensed spectrum is good, especially because the auction process is so dysfunctional that small companies like mine don't have a chance of being able to win any at auction. But I think we have to understand that unlicensed spectrum does not equal free Wi-Fi, a nationwide network or free Internet for all. It's just not practical to do that financially or logistically.

REHM

10:49:18
Todd.

SHIELDS

10:49:18
That's right. The FCC stakes out the garden. Other people have to come along and plow it. It cost money to get the rototiller out there, which is an imperfect analogy. I'll come up with something better if we do the show again. So his -- to his point, yes, that's correct.

REHM

10:49:30
But the question becomes what happens now? This proposal by the FCC, as you said, goes before the Congress. They're going to debate it probably the entire year. And then is it totally a political choice or is it one where people are going to weigh in?

SHIELDS

10:49:58
Oh, it's a highly political choice like most things in Washington. There are a couple of fights going on. One is the one we've talked about how -- what portion of these air waves do you give to the wireless uses, the Wi-Fi like uses, big chunk, little chunk. Another one is who do you let into the auction and on what terms?

SHIELDS

10:50:15
And AT&T and Verizon have been apprehensive that the Federal Communications Commission may find ways to limit their ability to bid the FCC's rationale for doing so would be to encourage competition so that smaller companies have room to breathe. And that would be a fight that goes until the day the action starts, I would imagine.

REHM

10:50:31
Susan, do you want to add to that?

CRAWFORD

10:50:33
So -- yes. In the last great auction we had in 2008, Verizon and AT&T basically just divided it up because they were willing to spend as much as it took to foreclose having a third competitor in there. T-Mobile didn't even bid. Now, we have an opportunity, our last great opportunity, to ensure that T-Mobile has a chance to get access to some of these low-frequency spectrum.

REHM

10:50:54
Scott.

CLELAND

10:50:55
Once again, selective facts. Sprint has, by far, the most amount of spectrum. Now, with Clearwire spectrum, it has, you know, probably twice as much. Now, it is higher. But higher and the amount they have as right next to Wi-Fi, it conceivably can be much faster than AT&T or Verizon could support. So they have spectrum -- Verizon and AT&T -- that can go through lots of walls. Sprint has spectrum that can do much faster potential speeds than the others. So that's a competitive market, different things.

REHM

10:51:26
Susan.

CRAWFORD

10:51:28
Yeah. It's just not true. Verizon and AT&T divide up among themselves 2/3 of the subscribers. They have 80 percent of the free cash flow. It's much more expensive for T-Mobile to run its business because it has to build many more towers 'cause it's way up in the spectrum. It's just another input that it doesn't have access to.

REHM

10:51:44
Todd.

SHIELDS

10:51:45
Just to add some more spikes in to the mix. In the case of Sprint, with their higher air waves, they need to build more towers. That's more expensive. Well, they've got a $20 billion bid coming in from Japan to buy the company and to, in essence, recapitalize. So may see some interesting moves by Sprint.

REHM

10:51:58
Interesting. All right. To Columbia Heights here in Washington, D.C. Good morning, Sarah.

SARAH

10:52:07
Yeah. Hey. Thanks for taking my call. This is Sarah.

REHM

10:52:08
Sure.

SARAH

10:52:09
And, first of all, fantastic program. Just everyone on your panel has just very great thoughts and also (unintelligible) expanded my knowledge on the topic. But as far as the whole spectrum issue, I felt like this is kind of a little bit of an old issue that The Washington Post was covering because seems like back in 2004, and then also 2008 with the auction your panel member just mentioned, that this idea of, you know, TV stations giving up the spectrum that they have to, I guess, incentivize, open up this Wi-Fi, I mean, it's nothing new.

SARAH

10:52:44
And I have a question specifically that once these -- the spectrum doesn't come available, you still have to overhaul and provide the service to run this. So who's going to be carrying that service to offer this supposed free Wi-Fi service?

REHM

10:52:59
Todd.

SHIELDS

10:53:00
We don't know who. There are companies that say, we're interested, we want to let 1,000 flowers bloom in this space. One interesting aspect is they talk about the new Internet of things to things, machine to machine may use this space but who knows in brief.

REHM

10:53:12
And you're listening to "The Diane Rehm Show." Let's go now to Waverly, Ind. Hi there, Bob.

BOB

10:53:22
Hi, Diane. Hey, thank you for taking my call.

REHM

10:53:25
Surely.

BOB

10:53:26
Very briefly. I'm on AT&T landline, landline only. And right across street, 60 feet from me is another company that offers high-speed Internet. I've got the wrong address. I called them up and they say, sorry, you got to go through AT&T. Definitely, a monopoly exists here. And I'll take my answer off the line.

REHM

10:53:51
All right. Scott.

CLELAND

10:53:53
I'm not sure of your geographic instance or what -- it maybe a franchise thing, and that's what you would take up with your local government 'cause certainly the policy of the country is to have as much competition. So potentially your local government is not promoting competition like the law says.

REHM

10:54:08
But here's another one, a tweet from Mackneighs, (sp?) who says, "I live just over one hour north of Boston. I can only get high-speed Internet from cable. How is that not a monopoly?" Todd.

SHIELDS

10:54:25
Well, that call -- that tweeter may not have effective choice in the marketplace, which is one of the issues that's underlying of what we -- what we're talking about here. There are many homes that are passed by one broadband wire, not two. If you have two, you can play the one off against the other. If you have one, you're stuck with what they have on the menu.

REHM

10:54:40
So -- go ahead.

CLELAND

10:54:42
Could I just add that from the FCC report, 96.6 percent of census tracks in the country have two or more competitors and about 79 percent have three or more. Is it perfect? Of course not. But even with phone, after 50 years of trying to get everybody a phone, it never got above 93, 94 percent.

REHM

10:54:59
Susan.

CRAWFORD

10:55:00
For the speeds we'll need to be watching video, you've only got one choice for it, between 78 and 82 percent of the country, and that's your local cable incumbent. DSL can't keep up. It maybe a choice but so is, you know, the tree in front of my house. It's not going to help me get online the way I like to.

REHM

10:55:17
Susan, what do you think the public's opportunity to have a say in this is going to be?

CRAWFORD

10:55:26
Well, this -- all these issues need to be on the public radar screen. You know, the president right now is talking about immigration. Maybe he'll take up telecommunications next. It's a big social policy issue. We'll have lots of opportunities to talk to our elected representatives about it. The niceties of the auction rules, it's tough for the public to comment. But they should be watching to make sure that we get actual competition for Verizon and AT&T in this next round and that we look over what the cable guys are doing on the other side.

REHM

10:55:53
Todd.

SHIELDS

10:55:54
It's an interesting time. Think of where we are now compared to 10 years ago. We all knew about the Internet then. But now it's woven into daily life in a way it wasn't before. And I think the policy apparatus in Washington is coming to terms with it in some pretty profound ways. And so like Susan says, we'll have debates going on for some time now and they'll be a close watching.

REHM

10:56:14
And, Scott, last word.

CLELAND

10:56:16
You know, and Susan says, you know, the cable monopoly. Every other country in the world doesn't have ubiquitous cable option, and 40 percent of people left Cable and went to DBS, to competitors. It's a competitive market. Cable is eating into AT&T and Verizon's market. Verizon and AT&T are coming and offering broadband service wirelessly. So it's a very competitive market.

REHM

10:56:38
Well, we shall see what happens in the Congress and beyond, and we'll see how the public responds as it becomes increasingly aware of this very important issue. Susan Crawford has been with us, professor of Cardozo Law School, author of the book "Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age." Scott Cleland, president of Precursor, and Todd Shields, a reporter for Bloomberg News. Thank you all so much.

CLELAND

10:57:19
Thank you.

SHIELDS

10:57:20
Thank you.

CRAWFORD

10:57:20
Thank you.

REHM

10:57:20
And thanks for listening. I'm Diane Rehm.
Transcripts of WAMU programs are available for personal use. Transcripts are provided "As Is" without warranties of any kind, either express or implied. WAMU does not warrant that the transcript is error-free. For all WAMU programs, the broadcast audio should be considered the authoritative version. Transcripts are owned by WAMU 88.5 FM American University Radio and are protected by laws in both the United States and international law. You may not sell or modify transcripts or reproduce, display, distribute, or otherwise use the transcript, in whole or in part, in any way for any public or commercial purpose without the express written permission of WAMU. All requests for uses beyond personal and noncommercial use should be referred to (202) 885-1200.

Our address has changed!

The Diane Rehm Show is produced by member-supported WAMU 88.5 in Washington DC.