Federal Communications Commission FCC 04-287

**STATEMENT OF**

**COMMISSIONER MICHAEL J. COPPS**

**APPROVING IN PART, DISSENTING IN PART**

***In the Matter of Amendment of Part 22 of the Commission's Rules To
Benefit the Consumers of Air-Ground Telecommunications Services;
Biennial Regulatory Review---Amendment of Parts 1, 22, and 90 of the
Commission's Rules, WT Docket No. 03-103***

***Amendment of Parts 1 and 22 of the Commission\'s Rules To Adopt
Competitive Bidding Rules for Commercial and General Aviation Air-Ground
Radiotelephone Service, WT Docket No. 05-42***

***Application of Verizon Airfone Inc. for Renewal of 800 MHz Air-Ground
Radiotelephone License, Call Sign KNKG804, File No. 0001716212***

***Report and Order and Notice of Proposed Rulemaking, adopted December
15, 2004***.

There is good and bad in today's *Air-to-Ground Order*. On the one hand,
our actions have the potential to give airlines and passengers new
communications technologies. The current air-to-ground narrowband
service surely has not fulfilled expectations. There are few calls made
each day and the service is high-priced and limited to voice. A new
broadband air-to-ground service could allow a far greater diversity of
services, including the ability to check email, access the Web, enhance
avionic support, and improve homeland security communications.

On the other hand, the way the FCC has decided to launch this new
service risks creating a monopoly for broadband air-to-ground services.
The Order creates an auction where one company can lock up the only
license that can support a true broadband air-to-ground service. That
means that if a company bids enough, it can exclude all other
competitors, leaving airlines with only one possible supplier and
passengers with no choice. Experience shows that if a company has the
chance to buy a monopoly license, it will pay a premium for it. That is
because it allows them, with one fell swoop, to ensure that competitors
will not be able to keep prices down or force them to innovate.

That result might be a feast for the monopolist, but it's famine for
consumers. Airlines will have to do business with the monopolist at any
price. That is why so many airlines stated on the record that we should
ensure competition. It also means that when passengers want to access
the Internet using a broadband service they will have to pay what the
monopolist charges or have no broadband service at all on the airplane.
It also means that when the Department of Homeland Security wants
broadband service for Air Marshals, there will be no chance for a
competitive bidding process, because only one company can offer the
service. This could lead to taxpayers paying far more for this DHS
no-competition contract than necessary. Historically, the risks of
creating a monopoly led the Commission to create multiple licenses when
it started the cellular service, PCS, satellite TV, satellite radio and
in every other auction initiating a new service that I can think of. But
we don't do so here.

While I am pleased that we include the chance for competing companies to
use the auction to win two overlapping three MHz licenses in the Order,
history doesn't indicate this will provide the competition consumers
want. Some of my colleagues argue this provides the potential for
competition. But I fear that this possibility is unlikely to be
realized. There is substantial record evidence that two companies
bidding for overlapping three MHz licenses will find it exceedingly
difficult to defeat a company bidding on a monopoly license, whether
that license is for 4 MHz or for 3 MHz. The potential monopolist has far
more to gain and will pay a significant premium to eliminate
competition. My colleagues also point to the fact that if a company buys
the exclusive 3 MHz license, a second company will be able to compete
with them using the remaining 1 MHz license. But this remainder license
seems unlikely to provide real competition. The 1 MHz licensee will have
1/3 the spectrum resources and the service it offers will likely have
only 1/4 of the throughput. The 1 MHz licensee may be able to offer
voice, but it will not be a real broadband competitor. Likewise, even
the Order itself concludes that satellite services, while useful and
important, are not similar enough to terrestrial air-to-ground services
to provide adequate competition. So the unwieldy combinatorial auction,
the orphaned 1 MHz narrowband licensee, and the dissimilar satellite
service are all unlikely to protect consumers. I therefore must dissent
to the decision not to ensure two competitive licenses in this Order.

Thanks to WTB and OET for their hard and good work.