IT’S GAME TIME.
The wireless industry’s version of March Madness is set to tip off Jan. 24, with 214 applicants vying for 1,099 spectrum licenses in the 700 MHz band being auctioned by the Federal Communications Commission.
But, it will be like getting periodic scoring updates without knowing who actually won what until a month or more from now – or around the time the real March Madness begins. The FCC will conduct two rounds of bidding the first day, three on Day 2, and set the pace for the remainder of the auction based on bidding activity. The names of winning bidders will not be announced until 10 days after the auction closes. The agency will review long-form applications of winners and consider any objections before licenses are actually issued.
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Like the college basketball tournament, there are big bucks at stake in the 700 MHz wireless competition. Bidding could generate more than $12 billion for the U.S. Treasury, though the absence of a company that had planned to bid more than a $1 billion for a nationwide license and shaky economic conditions could conspire to lower the government’s take.
The auction will feature a relative newcomer to the wireless space, Google Inc. The Internet search engine giant could have its sights set on wireless licenses – accounting for about one-third of the 62 megahertz of spectrum in play – that have an open-access condition. Another tech titan – Microsoft Corp. co-founder Paul Allen – is also qualified for the auction under the bidder name Vulcan Spectrum L.L.C.
Big players in play
Google and Vulcan will join a mix of leading mobile-phone carriers, cable and satellite TV operators and rural telephone companies in the hunt for 700 MHz wireless licenses considered highly valuable because of propagation characteristics that enable signals to travel long distances and penetrate building structures.
Only the top two national cellular carriers – AT&T Mobility and Verizon Wireless – will participate in the 700 MHz auction, with Sprint Nextel Corp. and T-Mobile USA Inc. taking a pass. Regional wireless powers Leap Wireless International Inc., MetroPCS Communications Inc. and Alltel Corp. also will vie for spectrum.
Cable TV juggernauts Cablevision Systems Corp., Advanced/Newhouse Partnership and Cox Communications Inc. were certified to bid, as was satellite TV operator EchoStar Satellite L.L.C.
CDMA technology king Qualcomm Inc. is in the 700 MHz auction mix as well. “We expect it will bid for licenses in the lower band to bolster its MediaFLO assets,” said Jessica Zufolo, a telecom analyst at Medley Global Advisors L.L.C.
Blocks to watch
The FCC will re-auction 700 MHz licenses whose reserve prices have not been met, with the agency reserving the right to modify license rules under such circumstances.
In addition to the 22 megahertz openaccess licenses in the C Block – which collectively have a $4.6 billion reserve price, much attention will be focused on the national commercial/public-safety license, or D Block. Frontline Wireless L.L.C, a Silicon Valley backed startup led by a high-powered management team of former telecom policymakers, had long been considered a leading contender for the D Block until its closed its doors after not submitting the $128 million upfront payment. As such, the public safety community can only hope that AT&T Mobility, Verizon Wireless or a dark horse – perhaps Google or Alltel – will decide to pursue a national mixed-use license that will cost at least $1.3 billion.
Some observers have doubts. “I have a hard time understanding why any of the big incumbent wireless carriers would go after the D Block with all the conditions,” said Carol Mattey, managing director of telecom regulatory consulting at Deloitte Touche, and a former FCC official.
As for the emergence of new national entrant in the wireless space, Mattey stated: “I’m very skeptical there will be.”
D-Block concern
First responder groups are skittish about the D-Block as a result of the Frontline upheaval.
“The Public Safety Spectrum Trust thinks it is important for the FCC to continue to do all that it can to advance the public/private partnership concept intended to build a nationwide broadband network for public safety,” said Harlin McEwen, chairman of the non-profit group licensed to work with a commercial winner of the D Block. “While it would not be appropriate for the PSST to comment on any potential bidder’s strategy, we want to restate our enthusiasm for and commitment to what the FCC has done.”
“APCO supports the FCC’s rules and auction procedures designed to promote the deployment of a nationwide public-safety broadband network,” stated Robert Gurss, director of legal and government affairs at the Association of Public-Safety Communications Officials International. “We continue believe that a viable public/private partnership to deploy that network will result from the FCC’s 700 MHz auction and the negotiation of a network-sharing agreement with the Public Safety Spectrum Trust.”
Rep. Jane Harman (D-Calif.), chairman of the House Homeland Security subcommittee on intelligence, information sharing and terrorism risk assessment, advised FCC Chairman Kevin Martin not to scrap plans to auction the commercial/public-safety license, despite the possibility no applicant will bid on the D Block now that Frontline Wireless has folded.
“Regardless of the prospects for this partnership, the policy goals it represents are fundamentally sound,” Harman stated. “I strongly urge you – in advance of this auction’s start date of Jan. 24. – not to amend any of the underlying rules, modify the terms of the partnership, or indicate any change to the FCC’s intent to vigorously oversee it.”
In a separate letter to House telecom subcommittee Chairman Edward Markey (DMass.) and ranking member Cliff Stearns (R-Fla.), Harman notified the lawmakers of her letter to Martin and acknowledged the combination of Frontline’s collapse and troubled credit markets make the “possibility of its [700 MHz D Block] failure real.”
Martin has acknowledged as much, but said he remains hopeful there will be taker for the D Block. The FCC chief has given no indication he plans to retreat on the public-private partnership even if the D Block goes unclaimed. In fact, if anything, Martin appears committed to making the D Block work as originally intended.
“I think public-safety issues are so important that the commission explicitly did not find that they would re-auction without those rules,” Martin told reporters. “And at this point, I think it’s premature for us to begin speculating what the commission would end up doing. I know the commission was unwilling to say that in the past and think it’s premature to speculate now. I think we’re still focused on this auction and we’re still optimistic that someone’s going to be willing to end up taking on that burden and try to serve public safety.”
