700 MHz: Land of opportunity

The upcoming auction of 700 MHz could give birth to an unprecedented infrastructure that could serve countless rural consumers as it provides a crucial boost to the nation’s public-safety industry.
Or it could be a debacle.
The winner of the highly prized chunk of spectrum will own a tremendous resource: the low frequency is unusually efficient, allowing for a network that doesn’t require a dense buildout and better in-building penetration. And the Federal Communications Commission has adopted limited open-access laws, leading to speculation that Google Inc. or another well-heeled outsider will join the ranks of mobile network operators.
But the winner will also be charged with building a nationwide wireless network that meets public-safety specifications for coverage and redundancy, and will have to negotiate a network-sharing agreement with the public-safety licensee. So any players considering jumping into the carrier space will need more than a blockbuster bid, according to Stagg Newman, CTO of Frontline Wireless. They’ll also need to invest heavily to build out the network.
“If you’re a business person looking at the D block, you need to be very rigorous,” Newman said yesterday during a pre-show seminar analyzing the auction. “Once you get the license, you damned well better build it out, because (otherwise) your investors are going to be very displeased.”
Indeed, while many of the details surrounding the auction have yet to be ironed out–the obligations a winning bidder will face are currently “written in chalk,” Northrop Grumman Information Technology VP Bill Andrle said during the session-it appears the FCC won’t tolerate dawdling from the winning bidder. FCC Chairman earlier this year that the commission will adopt the “strictest buildout requirements that it has ever had” in an effort to prevent spectrum warehousing.
And that was before the auction became tied to the public-safety effort. While the potential consequences are unclear, the winning bidder could forfeit both the spectrum and the cash if it doesn’t move aggressively to build the network.
Not that any of the potential bidders would willingly tweak Martin’s nose by sitting on the spectrum, of course. The swath of airwaves is worth between $10 billion and $15 billion, according to congressional budget experts. Even Verizon Wireless, which has sued the FCC over the open-access rules, wouldn’t risk losing that kind of money by buying licenses and sitting on them.
But while the hefty price tag will likely weed out any would-be spectrum-sitters, the FCC can’t guarantee that every participant has done its due diligence. A winning company that can’t live up to its end of the bargain could throw a monkey wrench into the entire industry.
“It would be a tragedy if a bidder with a whole lot of enthusiasm went in and totally underestimated” the financial obligations of building out the network, Andrle said. “Look at NextWave. We’re talking court of appeals stuff and litigation that goes on and on.”
NextWave Wireless, of course, has become the poster child for disastrous FCC auctions. Ten years ago the company won licenses in 95 urban areas in the United States, agreeing to pony up $4.7 billion for the spectrum over the next 10 years. But NextWave went belly-up two years later, tying up the spectrum as it wended its way through bankruptcy court. And the company sued when the FCC attempted to re-sell the licenses, forcing a settlement that saw several established carriers buy the valuable assets in a broad, $16 billion deal.
Most industry observers say the mandates for the 700 MHz auction are the best way to build out a much-needed infrastructure for public-safety workers. The network will ensure that first responders can talk to each other on the scene at an earthquake on the West Coast, for instance, or after a hurricane in Florida.
“We have to find ways of building gateways. so that we always have a common mode that these devices will be able to use across the country,” Cyren Call Communications co-founder Keith Kaczmarek said during the panel. “Yes, there are obligations to building out the network. But at the same time, there are opportunities.”