The FCC’s recently released Fifteenth Report on Wireless Competition  reflects positive change at the agency.  Under Chairman Julius Genachowski, the FCC is increasingly looking to more economic analyses of markets and competition and declining to endorse the conclusions of the major services providers that Wireless is competitive or simply restate the merits of longstanding policies. This is particularly important as consumers, small businesses, major enterprises and state governments are increasingly dependent on Wireless services.

The Fifteenth Report declines to conclude that Wireless services are subject to effective competition, emphasizing that Wireless competition in less populated areas of the United States remains a major concern.  Accordingly, the document poses a challenge to approval of the AT&T-T-Mobile merger.  The report’s charts and analyses enable instant snapshots of how various metrics of Wireless competition would be impacted negatively in the event the merger is approved.

For all of its strengths, the Fifteenth Report fails to connect “several of the dots” of the FCC’s  Wireless policy that adversely affects Wireless service and competition in rural areas.   For almost eighteen years, the FCC has assigned spectrum for commercial Wireless service principally though spectrum auctions.  The revenue generation objective underlying spectrum auctions has reinforced the concentration of desired spectrum resources among major Wireless services providers.

Over time, the licenses for spectrum suitable for commercial Wireless voice and broadband have been auctioned for increasingly large geographic areas.  The licenses extend across expansive Regional Economic Area Groupings (“REAGs”)  or the entire country.  Only the largest carriers or consortia with the deepest pockets have the resources to bid for these licenses, as in the recent AWS-1 and 700 MHz auctions.

While the fiscal imperative underlying spectrum auctions overwhelms the possibility for more enlightened approaches of spectrum licensing for commercial services, the FCC still could promote more aggressive deployment of Wireless broadband services in rural areas, over and above the proposals in the FCC’s Intercarrier Compensation/Universal Service Reform proceeding.  Foremost, the FCC should enhance the likelihood that auctioned spectrum will be utilized in less densely populated areas of the United States.  The change in approach should be based on a policy of “use it, lease it or lose it.”  This policy would dovetail with the FCC’s recent decisions promoting wireless roaming arrangements.

Spectrum auction winners should be compelled to build out networks throughout their licensed areas during the term of their ten-year licenses.  FCC construction requirements are based largely on population coverage tests.  While the FCC has begun to address these concerns with its construction requirements for the 700 MHz band, more is needed.  The reality is that while the most densely populated areas may be served, rural and underdeveloped areas of area-wide licenses are either underserved or not served.

Under a focused “use it, lease it, or lose it” policy, auction winners would be compelled to either (1) build out networks throughout their licensed territories, (2) lease or partition the un-served or underserved portions of these area-wide licenses to rural-focused services providers (who would benefit from the technology ecosystem driven by the major carriers in building out urban areas), or (3) surrender the un-served or underserved geography of their licenses to the FCC.