The FCC’s 700MHz Spectrum Auction, Hotel California and Dick Tracy’s Wrist Radio

The Federal Communications Commission (FCC) yesterday set requirements for its upcoming 700MHz spectrum auction, tying open access rules to approximately one third of the available spectrum. The agency did not, however, require the winner to offer spectrum access to any party at wholesale rates, as was requested by Google and consumer advocacy groups like Public Knowledge and the Consumer Federation of America.

The FCC’s decision means that the winner of 22MHz of the 60MHz that will become available when the spectrum is freed up will need to build a network that supports any device a consumer could want to use on those frequencies. Consumers who employ the spectrum will no longer be locked into what Edward Markey (D-MA), Chairman of the House of Representatives Subcommittee on Telecommunications and the Internet, called the “Hotel California” wireless service approach.

“Millions of consumers today feel trapped by wireless industry practices that thwart their ability to take their phones with them when they switch to a new service provider,” Markey said in a statement. “Right now, wireless offers a ‘Hotel California’ service, where you can check out anytime you like, but you can’t ever leave with your new $500 phone or PDA.”

Markey also said the decision will likely spur innovation in the wireless space.

“My hope is that when these frequencies come to market after the auction, they will spur innovation so that consumers will be able to purchase the 21st Century equivalent of Dick Tracy’s two-way wrist radios of comic book fame,” Markey said.

Personally, I think I’d prefer a shiny new iPhone to any two-way wrist radio, but I get Markey’s point: consumers—Eagles fans and haters alike—will now be able to take their pricey BlackBerrys and Treos with them if they decide to switch cellular carriers, and the world will be a better place.

But not everyone’s happy; there are both winners and losers. The wireless industry wanted as few new auction regulations as possible, claiming the current system works just fine and has yielded benefits for consumers in the form of wireless innovation and for the U.S. government in auction proceeds. Because the winner of the auction will need to support any mobile device on the new network, expensive infrastructure will be required, making the spectrum less attractive to potential buyers.

“We are disappointed that a significant portion of this valuable spectrum will be encumbered with mandates that could significantly reduce the number of interested bidders,” said CTIA President and CEO Steve Largent in a statement. CTIA-The Wireless Association is an international wireless telecommunications industry group.

“The competitive wireless marketplace that the FCC has encouraged in the past with market-oriented flexible-use policies has delivered benefits to American consumers that are nothing short of spectacular. The FCC’s deviation….could prohibit those benefits from being even more fully realized, and that’s unfortunate,” Largent said.

In a move to foster competition in the space, the FCC also ruled that the auction winner must not block or slow wireless or Web traffic from its rivals.

Where do you stand? Do you think the FCC made the right decision? Did the agency do enough to ensure fair and equal competition between cellular carriers? Or should it have included the wholesale access provision?

I couldn’t be more pleased that the FCC made it necessary for the auction winner’s network to support any and all mobile devices. I also think it would’ve been interesting if the FCC required the winner to sell access to the spectrum at wholesale rates. Such a requirement certainly would’ve been a much larger step toward true competition in the space—and not just between the existing competitors.