Recently on Forbes blog, James Crowe, the CEO of Level 3, put forth a novel proposal: despite what the FCC determined in its National Broadband Plan, what the President and NTIA have said and what motivated Congress to pass the recent spectrum legislation, James Crowe suggests that instead of bringing more spectrum to market, the solution to the wireless spectrum shortage is more wires.
Now I am not saying that cell splitting and adding more antennas and backhaul aren’t important tools for increasing network capacity. They are. But they do not eliminate the need for more spectrum to continue to meet customer’s exploding mobile data needs.
Mr. Crowe creates a strawman asking, “So why don’t wireless companies pursue this seemingly obvious approach?” Well, in fact, they do pursue this approach. But Mr. Crowe doesn’t let the facts get in the way of a good story and tries to link this assertion with Verizon and AT&T’s wireline services which are often used for wireless backhaul. Ahhh, now we see where this is going…
His beef seems to be that wireless companies who buy backhaul from AT&T and Verizon have taken advantage of lower per-unit pricing that is available if they are willing to buy larger quantities, commit to longer terms or both. Yet these incentives are perfectly normal business practices and familiar to most consumers (i.e., the healthclub that charges less per person for a family membership than for an individual membership, or a magazine subscription that costs much less per issue than the single-issue, newsstand price with even lower pricing for two or three year subscriptions).
So, wireless carriers in many instances have contracts in place for existing backhaul facilities that they are using to handle the traffic that their customers are generating. But not for future backhaul that will be needed to handle the exponential growth of mobile data traffic. This exponential wireless data traffic growth is what is driving significant investment in wireless network infrastructure including new cell sites. And the new 4G technologies like LTE require new backhaul facilities – fiber to the cell site. Companies compete fiercely to win these contracts to build new, fiber to the cell site facilities. The wireline phone companies are competing to build them. The cable companies are competing to build them and, in fact,wireless backhaul is one of the most rapidly growing revenue sources for cable companies. And of course, many other companies including Level 3 are competing to build those facilities. All of which has created what Amanda Tierney, VP, Wholesale Markets for Level 3, calls a “very competitive space” that has seen competition “dramatically increase”.
Sadly, rather than competing in the market, Mr. Crowe would prefer to try to game the regulatory process to hobble one set of his competitors. He is not the first to take this route, nor will he be the last, but in the long run, this is never a very sound business strategy.