LAS VEGAS – Despite troubles brewing back in Washington, D.C., regarding Cyren Call Communication Corp.’s handling of its partnership with the Public Safety Spectrum Trust in regards to the failed auction of the D-Block license, Chairman Morgan O’Brien took Cyren Call’s message to the people last week speaking at the Rural Cellular Association’s 16th Annual Convention and Exhibition in Las Vegas.
And that message: rural carriers should team up to bid on the D Block during its re-auction that O’Brien thinks could happen as soon as October.
Pie-in-the-sky dreaming? Perhaps. But, several members of the rural wireless community in attendance said they would look closely at the possibilities.
O’Brien’s keynote speech included a quick skim over what transpired prior to the failed attempt to find a party willing to meet the Federal Communication Commission’s $1.33 billion reserve price during the 700 MHz auction – facts Congress is now investigating. But once past the past, O’Brien, who has had a mixed history with rural carriers dating back to his days leading Nextel Communications Inc., dived headfirst into a sales pitch on the advantages of spending what could be billions of dollars on a public/private partnership that would serve both a rural carrier’s traditional customer base as well as millions of public-safety personal.
“For 15 years I acquired spectrum for Nextel relentlessly. We never had a spectrum position this strong at Nextel as this entity starts out with on day one. And it’s all contiguous,” O’Brien explained. “It doesn’t come better than contiguous spectrum at 700 MHz if you are focused on building a mobility-centered wireless network.”
Beyond the obvious benefits of 700 MHz spectrum, O’Brien highlighted the potential gains for rural carriers, including the resources necessary to offer advanced wireless services to their customers, a way to bypass ongoing roaming data issues as well as a stronger position in which to compete against the nationwide operators.
To sweeten the pot, O’Brien said he thinks the FCC will loosen some of the bidding rules on the D Block, including either lowering or eliminating the previous $1.33 billion reserve price as well as altering a penalty that would see the auction winner not only lose the license, but up to 10% of the license price if they were unable to come to an agreement with the PSST within six months of the auction’s conclusion.
O’Brien also made a point of highlighting a timing issue, noting the parties at the FCC involved in approving such a proposal could change following the presidential elections.
“I think it’s very important to try to get it done this year,” O’Brien said. “It would appear you have five commissioners in favor of another auction with the modified D-Block restrictions. Next year we could have different commissioners and you can only go down from 5-0.”
O’Brien added that while some may think such quick action would be reckless, he thought five or six months would be enough time to get through the process.
One requirement O’Brien did not back away from was the scope of the network’s coverage, though he did try to downplay what that coverage actually entailed.
“You can’t imagine the number of discussions I have had with members of Congress and that I have not been able to get across the distinction between [potential customer]coverage and geographical coverage despite drawing pictures,” O’Brien said, drawing a chuckle from the audience. “Ninety-nine-point-three-percent pop coverage works out approximately to 75% geographic continental U.S. geography coverage. So, depending on which side of the Mississippi you are living on, it’s phenomenal, demanding coverage if you are east of the Mississippi, or it’s not nearly enough if you live west of the Mississippi. One of the major areas of negotiations will be the 99.3% coverage in 10 years and this is not Cyren or public safety talking because public safety has to consult with its constituents before it takes a position on anything like this.”
O’Brien also managed to throw some doomsday prognostications into his speech, noting that for many rural operators, the D Block could be their last chance to hammer a stake in the ground of the wireless market.
“I know right now in nearly May of 2008, the financial markets are bad, real bad. And I know it’s tough to compete with a wireless operator that has 60, 70 or 80 million customers. And I know this is a complex and novel opportunity,” O’Brien said. “On the other hand if I was in wireless, and not AT&T or Verizon, I’d be concerned about the future because I believe that accumulation of that much spectrum and power usually results in bad stuff for everybody else. That’s the perspective I’m suggesting.
“Please don’t consider what I said. Please don’t consider anything from Cyren or PSST that would say this will be easy or this is obvious or this is your last chance and if you don’t, you are crazy. We’re not taking any of these positions. We are saying that 20 megahertz of spectrum nationwide is close to a once-in-a-lifetime opportunity and should be studied by any serious player in wireless particularly as the rules are in flux towards making it a more attractive commercial opportunity.”
RCA Executive Director Eric Peterson said the association would look at setting up a committee to look into putting a consortium of rural carriers together to possibly bid on the D-Block license.
Patrick Riordan, president of Wisconsin-based rural carrier Cellcom Inc., echoed Peterson’s claims to being interested in O’Brien’s proposal, but expressed concerns about eventually being trumped by larger players.
“We are interested,” Riordan said, “But, we have to be careful in being led down a primrose path.”
O’Brien acknowledged the risk involved for small carriers in investing time and effort into possibly bidding on the D Block, only to see that effort foiled by a deep-pocketed carrier coming in at the last minute with a superior bid.
“It will be teed up at the FCC,” O’Brien said. “It will be up to them to decide if they will let them in or kick them out. There is rational for either.”