FIRST IT WAS Cyren Call Communications Corp. Then, more recently, Frontline Wireless L.L.C. And now, even more recently, Google Inc.
The mobile-phone industry, itself an iconic symbol of cutting-edge disruptive technology, suddenly is uncomfortably under siege by a new wave of disruptors that have their own ideas about how valuable spectrum can be put to the highest and best use. The magnet for the outside-the-box ideas is the 60 megahertz of spectrum in the 700 MHz band, highly valuable airwaves with exceptionable propagation characteristics that could fetch up to $15 billion for the U.S. Treasury at auction later this year.
Google wants the Federal Communications Commission’s blessing to use dynamic auctions in the 700 MHz band, a proposal whereby auction winners would re-auction spectrum in real time to others. The concept is not unlike competitive bidding among advertisers that Google exploits to underwrite its core Internet search engine business.
Ivy-league backing
Google points to Eli Noam, the tech savvy professor at Columbia University, who called for open spectrum access in a 1995 paper. Noam said at the time auctions were fine and preferable to previous licensing methods such as comparative hearings and lotteries, but he warned of market concentration at the expense of new entrants in the wireless space.
Google is picking up where Noam left off, but is up against the $120 billion cellular industry-led by AT&T Mobility, Verizon Wireless, Sprint Nextel Corp. and T-Mobile USA Inc.-which controls most mobile-phone spectrum in the United States.
“While Google suggests that its proposal is an open-market approach, it ignores the fact the spectrum auction to be conducted by the commission is just such an open-market event-one that encourages those who seek to maximize the value of their investment in spectrum to bid the highest amount to acquire the desired assets,” said the industry’s largest player AT&T Mobility. “Rather than being an open market solution, Google seeks to impose a single regulation-based model on those who incur the risk of buying spectrum, by mandating how that spectrum will be put to work, all presumably without Google spending any capital to acquire spectrum, or build and maintain a network.”
The Mountain View, Calif.-based company has been coy about whether it plans to bid in the 700 MHz auction. It would be a first for Google.
“Imposing Google’s proposed conditions on 700 MHz licenses would run counter to pro-competitive commission policies for both the mobile marketplace generally and for bidding in the auction itself,” stated cellphone association CTIA. “Moreover, to the extent Google’s ‘dynamic auction mechanisms’ are comprehensible, they are either already permitted or they have been previously rejected and should be dismissed now.”
Waiting for rules
The FCC wants to issue 700 MHz rules this month to give prospective bidders six months to prepare for the auction. A complicating factor is the agency’s consideration of options to create a 700 MHz license for national commercial broadband wireless access and national public-safety broadband services. Frontline has proposed setting aside a 10-megahertz block to help further broadband and public-safety policy goals based on a wholesale, open-access business model. In addition to the 10 megahertz, Frontline’s plan would have the E-block licensee gaining access to a separate chunk of first-responder frequencies at 700 MHz. Frontline plans to compete in the 700 MHz auction.
Frontline, with high-tech funding, backs the Google auction plan in earnest. Indeed, Frontline wants the E-block licensee to use 25% of its commercial capacity for open active auctions.
“Google is right: The 700 MHz spectrum is too important to the future of broadband in this country to go unused,” Frontline told the FCC. “Warehousing spectrum may be a sensible strategy for dominant firms, but it certainly does not serve the public, to whom the spectrum resource belongs.”
Qualcomm Inc. said the FCC should reject Frontline’s and Google’s proposals. “Google does not bother itself by stating just what legal authority the commission has to dictate the pricing plan that a wireless licensee must use, and in any event, there is absolutely no reason for the commission to do so,” stated the San Diego-based CDMA giant.
The public-safety community appeared suspicious of the Google plan. “The market-driven direction Google fervently embraces does not capture the standard by which emergency response is judged, that of dispatching the proper resources as expeditiously as possible,” stated the National Public Safety Telecommunications Council. “Emergency response is measure by neither revenues nor return on capital. If technologies and applications are to coexist with other services, each must accommodate, not ignore, the other. Google’s proposals need to acknowledge and demonstrate this capability.”
