Softbank’s run on U.S. spectrum auctions

A funny thing happened on the way to a recent meeting in Washington.  A DC bus rumbled down Pennsylvania Avenue declaring Softbank an “innovator.”  Later, as I caught up on politics on my Galaxy S5, banner ads again touted the Japanese-based company.  At National Airport, too, similar messages literally hung from the rafters.

With a market cap hovering around $90 billion, Softbank is well-known on Wall Street.  Yet it is still relatively unknown on Main Street—despite the fact that the company now has 54 million U.S. customers after its 2013 acquisition of Sprint and Clearwire.
Why is the company so publicly courting U.S. policymakers? 
 
{mosads}Most industry watchers would say it’s in order for Softbank and its Chairman Masayoshi Son to garner support for an expected effort to acquire market disruptor T-Mobile, which added more subscribers in Q1 than AT&T and Verizon (both Mobile Future members) combined.  News reports say a deal could be announced as early as June or July.

While that effort is underway, Softbank and its U.S. subsidiary, Sprint, also are hard at work trying to get a discount from U.S. regulators in upcoming FCC spectrum auctions—the rules of which are expected to be unveiled in mere days.

The idea that one of the world’s leading technology companies with enough capital to acquire two national U.S. wireless companies now seeks a regulatory boost from the U.S. government is tough to swallow – and harder to defend.  But even more troubling is the notion that some might actually believe such unabashed favoritism may benefit consumers.
 
In announcing his opposition to such a “thumb on the scales” approach to designing national spectrum auctions, FCC Commissioner Ajit Pai likened preferential rules to life on George Orwell’s dystopian Animal Farm, where “we are all equal, but some are more equal than others.”

At a recent Mobile Future forum, representatives from both sides of the aisle on Capitol Hill echoed Congress’ three-fold intent in authorizing the auctions: to get more spectrum to consumers, to finance the nationwide wireless public safety network promised to all Americans in the wake of 9/11 and to reduce the deficit.  A recent letter from 78 House Democrats to FCC Chairman Tom Wheeler reaffirmed these goals.

These objectives make clear that a successful auction must raise tens of billions of dollars—rendering recent comments from the broadcaster community ominous.
 
At the same forum, Preston Padden, Executive Director of The Expanding Opportunities for Broadcasters Coalition, pointedly reminded the tech-heavy crowd that the FCC is planning to auction spectrum it doesn’t yet have. The amount of spectrum made available for auction is dependent on how much spectrum broadcasters voluntarily relinquish.  Restrictive rules and special spectrum set-asides, like those promoted by Softbank, could reduce bidding and heavily deflate spectrum’s value at auction, and could discourage broadcasters’ auction participation, Padden warned, resulting in a disastrous outcome for mobile innovators and consumers alike.   
 
As the U.S. spectrum auction design debate comes to a head, the FCC would be wise to embrace fully open auctions, and say a firm and principled “no” to national competitors like Softbank/Sprint who seek special rules, special treatment, and special favors. 
This makes common sense.  And also supports the common good.  
 
In the long run, fair, open, and non-restricted government-run auctions for our nation’s spectrum resources will maximize the amount of new airwaves available to fuel continued U.S. mobile innovation, sustain competition and American leadership in wireless technology, and assure U.S. mobile consumers that none are more equal than others.  
 
Mr. Son says he stands for real competition.   If that is indeed true, then he should welcome it —in full force, and unalloyed—on the auction block. 

Jonathan Spalter, chairman of Mobile Future (www.mobilefuture.org), has been founding CEO of leading technology, media, and research companies, including Public Insight, Snocap, and Atmedica Worldwide. He served in the Clinton Administration as a Director on the National Security Council.