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It's Not Super WiFi, but It's Still Important: The Debate Over 'Unlicensed Spectrum'

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This is a complex issue that could spur a new wave of technological innovation in America.

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On February 3, Cecilia Kang of the Washington Post wrote an article about a federal plan to create a super WiFi network. The story was widely picked up and circulated, with an array of media outlets reporting on the promised new network and the major mobile carriers' plans to block its creation. (See Mashable's "Government Wants to Create Free Public 'Super Wi-Fi" and Business Insider's "Telecom Corporations Are Trying To Stop The Government From Offering Free 'Super WiFi.'")

Soon enough, however, contrary reports surfaced saying that the media had misunderstood the FCC's debate, and that a free Super-WiFi was not actually in the works. (See this story from Jon Brodkin of Ars Technica.)

So what is happening? As it turns out, the FCC is currently considering the "reverse-auction of unlicensed spectrum" to spark innovation. The story is much more complicated than the original news suggested. This debate has been ongoing for years and will continue into the future. Despite the fact that it won't create what was being touted as a free, public, Super WiFi, the move by the FCC may potentially have very significant ramifications. Here's what the "reverse-auction of unlicensed spectrum" means, and why it matters for tech and media investors.

Unlicensed Spectrum and the Plan

To get the facts straight about unlicensed vs. licensed spectrum, we contacted David Valdez, Senior Director of Public Advocacy at Computing Technology Industry Association (CompTIA).

He explained the key differences between the two types of spectrum: licensed, which is used by cell phones and the major telecommunications companies like AT&T (NYSE:T), Verizon (NYSE:VZ), and Sprint (NYSE:S), and unlicensed, which is used for WiFi, Bluetooth, garage door openers, and other devices. Licensed spectrum is exclusive, so a network can only be used by the company that has rights to that spectrum, while unlicensed is open to any number of companies and devices. Generally, if you have a device that communicates with another devices, and is not a cell phone, it functions on unlicensed spectrum.

What is being discussed at the FCC is UHF band, a super strong spectrum that's projected by powerful TV antennae. TV stations use this unlicensed spectrum in the form of guard bands between channels to help eliminate interference. These guard bands manifest as white space, the fuzzy channels, and are essentially inefficient.

TV stations own the channels, so they own the frequency, and through non-interference licensing with the FCC, they have access to those guard bands. The FCC's plan is to incentivize stations to release inefficient channels and open up the guard bands to be used as additional unlicensed spectrum, which companies could buy access to from the FCC.

The FCC plans to repackage channels for TV stations to make them more efficient, rendering the guard bands unnecessary. Moreover, it will compensate TV stations for the auction of the unlicensed spectrum.

This would be about a two- to three-year process and would create what Valdez calls "the world's first nationwide unlicensed spectrum band suitable for robust wireless broadband, on contiguous low-band frequencies."

The Importance of Unlicensed Spectrum

A reverse-auction of unlicensed spectrum could have huge benefits for the country's small to medium business (SMB) ecosystem. Licensed spectrum is an industry worth billions of dollars, and it is hard for SMBs to enter into it. It's extremely difficult for small companies to innovate on licensed spectrum because, as Valdez said to me, "At the end of the day, the AT&Ts and Sprints have the last call on who runs on their network."

Unlicensed spectrum could be highly available to SMBs; it could be the place where they have a level playing field as far as opportunities for innovation. To draw an analogy, in the early days of the Internet, all an entrepreneur needed to innovate was some coding experience, some capital, and Internet access. This is how Mark Zuckerberg created the social network juggernaut Facebook (NASDAQ:FB). Valdez compared the entrepreneurial freedom of the Internet with that of unlicensed spectrum: Innovators in tech devices will benefit from unlicensed spectrum in the same way that Zuckerberg and his contemporaries did from the Internet, though probably to a lesser extent.

Unlicensed spectrum is also important to the big businesses; all of the major mobile carriers use unlicensed spectrum to offload their traffic. When you get to the office or go home, your cell phone can connect to WiFi, which is broadcast on unlicensed spectrum from a router, alleviating traffic on the licensed, mobile network. If there was more of this unlicensed spectrum available, the major carriers could definitely use it.
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