Spectrum to spare?

You know the wireless data market has hit the big time when spectrum owners from other industries begin moving their offerings from their own licensed spectrum bands and onto the airwaves of wireless carriers.

Here are three clear examples of this trend:

• Satellite radio provider Sirius XM reportedly is working on an iPhone application. Such an offering would essentially offload content broadcasting on Sirius XM's dedicated satellite radio network and onto the data network of AT&T.
• Clear Channel's iheartradio app for iPhones and BlackBerries retransmits a wide swath of the company's various local radio broadcasts onto the airwaves of wireless carriers like AT&T and Sprint Nextel.
• And finally, MobiTV takes content that, in some cases, gets transmitted over a local TV station's broadcast spectrum and redirects it onto wireless carrier networks.

So what does this mean for wireless?

First, it's another clear signal the wireless industry has become a gathering place for all kinds of content owners--even those that own spectrum somewhere else. The case of Sirius XM is especially surprising; according to PBS' Online NewsHour, the company paid a total of $173.2 million in 1997 for S Band spectrum to offer nationwide radio services. Today, following the last-ditch merger between Sirius Satellite Radio and XM Radio, Sirius XM counts around 19 million customers and losses that totaled a whopping $5.3 billion for 2008.

Now Sirius XM hopes to emulate at least a little of the success of Pandora. Pandora is an Internet radio provider, which means the company broadcasts tunes over the networks owned and managed by others (but still must pay the music-licensing fees that Sirius XM does). And according to Bloomberg, Pandora is set to become profitable next year thanks in large part to the more than five million iPhoners who use Pandora's app (Pandora is the third most popular free app of all time in the Apple App Store).

Now here's the catch: Which app would a consumer choose? The free one from Pandora or the one that requires a Sirius XM subscription? It does seem Internet radio providers have the best position of all: No real spectrum or network costs, and the ability to blast out ad-supported offerings for free to mobile users via carrier's open cell networks.

Naturally, this situation raises two related issues: First, carriers are worried about network overload, and rightly so: AT&T Chief Executive Randall Stephenson recently told The Wall Street Journal wireless operators aren't prepared for the onslaught of data traffic coming from smartphones, and that the deluge is beginning to clog their networks. Second, carriers are under fire to change their walled-garden ways and embrace openness and network neutrality. Proponents of open networks and net neutrality argue Internet networks, including wireless networks, should be opened to all comers--Verizon Wireless' LTE network (to be built on the 700 MHz C Block) carries this exact stipulation from the FCC.

Therein lays the dilemma. The wireless industry must be pleased it has created a gathering place for content owners: Bring us your offerings and we'll make them mobile. But the whole situation--spectrum owners forsaking their own airwaves in favor of those owned by wireless carriers--must keep someone awake at night. Maybe not the cosseted CEOs of multi-billion dollar wireless operators, but perhaps the network engineers tasked with keeping everything running. --Mike