Chairman Martin and the rest of the Commissioners testified in front of a full house this morning in the House Commerce Committee.  As expected the topic du jour was the draft 700 MHz rules and I thought Chairman Martin’s logic behind those rules was sound – even though I disagree with the approach. 

Martin’s justification for the 22 MHz block (C-Block) to have open access conditions reverberates back to the policy discussions a few years ago on number portability.  In this instance, he is concerned about a consumer paying for new devices – like an iPhone – that they cannot take with them.  Not to mention a related concern with the early termination fee (“ETF”).  The justification for an ETF is that it is in place to subsidize the phone.  Many next generation devices will not be subsidized.  Accordingly, this spectrum will allow device portability as well as apply Carterfone principles to incent innovation in wireless broadband.

Chairman Martin did not feel it was necessary to adopt Carterfone principles on the rest of the 700 MHz band or legacy spectrum held by the industry.  Mr. Martin also does not believe that additional conditions - wholesale – are necessary.  With regard to wholesale, he believes that the condition can be a disincentive to investment by the organization that has the license.  Commissioner Adelstein and Commissioner Copps believe the wholesale provision would be a good thing.  They feel it might mitigate the impact these rules will have on rural wireless carriers - which has been a frequent topic at the diner.

One interesting exchange this morning was with Congressman Joe Barton (R-TX) and Chairman Martin.  As you may know, Martin has put a $4.6 billion reserve price on the C-block and a $10 billion price on the whole auction.  Barton asked Martin if he did that because he was concerned that putting conditions on the spectrum will lower interest in the spectrum.  Martin responded: “I was concerned that you were concerned.”  Martin went on to explain that he is comfortable with the CBO score for the auction ($12.5 billion). 

Chairman Martin has the necessary votes to approve these rules and get the auction started in a manner that meets the deadlines specified by Congress.  I disagree with the Chairman’s approach but appreciated the opportunity to hear him discuss his proposal this morning.  It will be interesting to see how all of this plays out over the next few years…

Dish Disclosure – Our firm represents CTIA and the Wireless Broadband Coalition on spectrum issues.