How Auctions Will Make Cell Service Better for Everyone

GOOGLE AND APPLE have pushed us closer to a world in which we’re freed from the tyranny of wireless carriers. Declan Ganley wants to take us all the way there.

With its latest Android phones, Google is offering a wireless service, dubbed Project Fi, that automatically switches between Sprint and T-Mobile, depending upon whose signal is strongest. In every new iPad, Apple now offers a SIM card that lets you try various providers—including Sprint, T-Mobile, and AT&T—before choosing one. In some cases, you can just as easily drop one carrier for another.

Wielding the power that comes with building the world’s most popular phones, Google and Apple are moving us toward a world where we can move seamlessly between carriers from month to month, day to day, even moment to moment.

As a consumer, you want this. You don’t want a single carrier maintaining an inordinate level of control over the networks you use and how much you pay. You want a market with unfettered competition, where you can jump from carrier to carrier as need be. And that’s what Ganley is trying to build.

Ganley is the CEO of Rivada Networks. On its webpage, Rivada describes itself as a company that designs “public safety” wireless networks—communications systems that police, firefighters and other first responders can use in an emergency. But its mission is larger than that. In tackling public safety networks, the company has created technology that lets companies freely bid on available wireless infrastructure, and it hopes to bring this to the wireless networks the rest of us use.

In other words, it wants to create a truly free market for wireless service, one in which companies like Apple and Google bid for the use of services from Verizon, AT&T, T-Mobile, Sprint, and beyond.

Such a market would work much like the electricity market works today. “Basically, supply and demand meet and a price is set,” says Ganley. The end result: consumers can move freely among networks. “Apple and Google and others are already experimenting with this kind of thing, and you will see this continue,” Ganley says. “The wireless carriers will no longer be gatekeepers to others. They will be something else. And those others will be able to come in and compete.”

That would be an enormous change. Yes, phones can “roam” between networks. If you use AT&T at home in San Francisco, you can hop on another network when you visit London. But AT&T controls where you can roam and how much you’re charged. Plus, you can’t roam on networks that don’t use the same type of wireless network AT&T uses. Simply put, Rivada aims to provide unfettered roaming. All wireless services would become one thing, much like the power grid is one thing.

Better Coverage, Lower Prices
Such an “open access” network would significantly reduce the power and the profile of the big-name wireless carriers, but it would provide better coverage and lower prices for consumers, says Peter Cramton, a University of Maryland economics professor who recently co-authored a paper exploring this very idea. (Although Rivada sponsored the paper, Cramton says it only reflects his opinions and those of his co-author, Linda Doyle, of the University of Dublin).

“This idea has legs, and in fact, it’s inevitable,” he says. “This can take advantage of the existing infrastructure of the current incumbent carriers and allow things happen in a much more economic and faster way. It can transform an oligopoly market into an Internet ecosystem, where anyone with a good idea can enter.”

Under this model, wireless carriers auction off access to their infrastructure, and then companies bid according to what they think they’ll need in the months or years to come. If those needs change, companies could even bid in near realtime. Apple could bid. Google could bid. And so could wireless carriers themselves. Verizon, for instance, could not only offering its own infrastructure to the auction, but bid on the infrastructure of other carriers as well. “This is very much a two-sided market,” Cramton explains.

Feeling the Effects
Of course, the biggest carriers will likely resist such a model. But in the long run, they’d acquiesce. “AT&T and Verizon, the dominant incumbents in the US, will not have incentives to encourage an open access market initially,” Cramton says. “But the market effects are going to come from T-Mobile and Sprint and smaller carriers.”

We’re moving toward one giant network and a truly free market for wireless.
Think of it this way: Just a few years ago, carriers never would have backed Project Fi or the iPad SIM. But Google and Apple make the phones people want to use, and in an effort to compete with AT&T and Verizon (which together control about 70 percent of the market and 90 percent of the revenue), T-Mobile and Sprint have agreed to work with Google on Project Fi. Meanwhile, AT&T as well as T-Mobile and Sprint are working with Apple on the iPad SIM. As time goes on and more people use these technologies, AT&T and Verizon will have no choice but to play along.

And so it will be with the “open access” network Cramton describes. “The weakness of the small carriers is coverage. They can’t economically build the kind of coverage that AT&T and Verizon can. The open access model allows them to build coverage and compete much more effectively.”

Congestion Pricing
Mexico, where a single carrier dominates the market, is already eyeing this setup. And here in the US, Rivada is pushing to build a public access network with its technology. Seven years ago, the government set aside a swath of wireless spectrum for such a network, but the carriers balked at the opportunity. Now, the Department of Commerce is working to finally realize this network, called FirstNet, and Rivada believes it can help. If the network is built with Rivada’s model, carriers could provide spectrum to first responders as needed, and then offer access for other uses when the system isn’t being used in emergencies.

“With the open access model, the price is determined by congestion,” Cramton says, meaning the price goes up for infrastructure that can serve areas where users are particularly hungry for wireless access. “That creates revenue, especially in the major, congested markets, like New York, LA, Chicago, Washington.”

The hope, however, is that the same basic model is applied to other domestic wireless networks. “This can, and should, apply not just to public safety networks but to a wider tract of the wireless spectrum,” Ganley says. “The ways of allocating spectrum that we have been using are the equivalent of granting royal charters of the East India company of old. It’s an oligopoly over pretty vast tracts of the radio spectrum.”

Political Movement
That will take some doing, not only politically but technically. But the market already is shifting in this direction. In the US, every major carrier is moving toward the LTE wireless network standard, which will make it much easier for phones to switch among carriers. And Apple and Google are building phones with wireless antennae that work with practically any wireless spectrum.

Meanwhile, Rivada says it already offers the technology needed to provide an open access market—and that it will work with existing wireless infrastructure. In short, we’re laying the groundwork for one giant wireless network. “This,” Cramton says, “can provide universal service.”

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