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Technology Stocks : Sprint Nextel Corporation (S)
S 8.6200.0%Apr 1 12:00 AM EDT

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From: Peter Dierks12/30/2009 11:39:14 AM
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Broadband Blockage
Why wireless carriers are running out of capacity.
DECEMBER 30, 2009.

Nationwide, holiday sales over the Internet rose by 15.5% this year. But some New Yorkers who tried to purchase iPhones online were out of luck. Late last week, AT&T, which sells the device, began blocking orders through its Web site. Sales resumed Monday afternoon without an official explanation from AT&T of what happened, but an underlying problem still needs to be addressed.

AT&T previously acknowledged that its network has been overwhelmed by iPhone users in New York and San Francisco, where dropped connections and long waits for running programs are not uncommon. These data-hungry cell phones compete for bandwidth with broadcast TV, radio and Wi-Fi networks, and wireless carriers like AT&T and Verizon say that they're running out of capacity.

We're told that the situation in New York City over the weekend had mostly to do with AT&T underestimating iPhone demand. But unless policies for allocating spectrum become more conducive to new technologies, turning away potential customers could become more frequent.

The reality is that the demand for mobile broadband is exploding, thanks to the popularity of the iPhone and rivals like the Palm Pre, the Blackberry and Verizon's Droid. According to the Federal Communications Commission, the use of smart phones has grown by nearly 700% the past four years, and mobile data are increasing at a projected rate of 130% annually as more people use their phones to send photos and watch videos.

Spectrum is finite, but it doesn't need to be as scarce as it is. The problem is how the frequencies are being managed. Less than 10% of the spectrum coveted by wireless carriers has been allocated for commercial use. Much of the rest is controlled by the government. Television broadcasters and satellite companies also possess excess spectrum that could be made available to wireless carriers. Competitive bidding is the best way to allocate spectrum, but the government auctions are much too infrequent—only two in the past four years—and the licenses often come with cumbersome restrictions. The result is congested networks, frustrated customers and slower innovation.

Legislation sponsored by John Kerry and Olympia Snowe in the Senate, along with Henry Waxman and Rick Boucher in the House, would mandate an inventory of available spectrum to identify bands that are unused or underused. It's a good place to start.

online.wsj.com
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