Editor’s Note: This is one of a series of stories examining the current economic downturn and how it affects the wireless industry. For more on this topic, visit RCRWireless.com/ Economic Downturn.
The potentially cataclysmic collapse of Wall Street has injected a new, pressing issue into an advancing – yet still highly unsettled – D-Block debate: capital for a nationwide or regional collection of cutting-edge, public-safety/commercial wireless broadband networks whose cost could total $20 billion.
“The wreck and ruin left in the wake of [the] financial meltdown only make matters worse – perhaps infinitely so,” said Federal Communications Commission member Michael Copps, at a meeting in which the agency voted to seek public comment on a new D-Block plan in the aftermath of the failure to attract a bidder for the minimum $1.3 billion license at the 700 MHz auction earlier this year.
“Finding money in the hallowed canyons of Wall Street or anywhere else to get this network built makes Indiana Jones’ searchings look like child’s play,” Copps continued. “Lack of certainty on top of lack of funding will not a public-safety network make. Before we set an auction process into motion – before we even design the incentives necessary – the FCC simply must get a firm fix on what the rough costs of the public-safety network are going to be. We need to know that this investment is something bidders can actually expect to recoup under the rules we establish – or else we won’t get any bidders this time around either. I would just as
soon take my chances passing a tin cup on Wall Street as put my faith in plunging financial markets finding a way to pony up billions for a network whose design and business case the FCC doesn’t fully understand and has not, to my mind, sufficiently investigated.”
Signals crossed
The FCC doggedly continues to wrestle with how to bring interoperability and broadband capabilities to the country’s first responders. The commission again is soliciting input – under a lengthier timeframe than originally planned in response to congressional browbeating – on a revised package that attempts to bring more clarity and certainty to a public-private partnership approach designed to attract private-sector investment without unnecessarily compromising strict public-safety communications requirements. The D Block would comprise 22 megahertz (10 megahertz of commercial spectrum and 12 megahertz of public-safety spectrum) in a 700 MHz band with superb propagation characteristics.
All told, the resurrection of the D Block remains a Herculean challenge in view of the dour economic environment and lack of consensus in the public-safety and wireless sectors. Complicating matters further is the fact that policymakers at the FCC and Congress are far from unified on how to proceed on the D-Block re-auction, with some recently sending mixed signals.
“We have not undertaken to assess whether the costs we are asking the private sector to bear have any relationship to the returns it can expect. I would have preferred to see much of the amount that will go to the minimum bid to go to building out the network rather than paying for the spectrum,” said Commissioner Jonathan Adelstein, who along with Copps represent the minority on the GOP-led FCC. “Particularly in light of the unprecedented credit crunch facing our nation’s economy, it is irresponsible for an expert agency to pull numbers out of thin air that generate revenue for the Treasury, but deprive the private sector of the means to accomplish our ultimate goal of a viable public-safety network. Our first priority should be helping our first responders, not raising money.”
Seven years and counting
FCC Chairman Kevin Martin acknowledged the economic challenges and differences among major stakeholders on how D-Block rules should be restructured, but said it was important to move forward.
“We – and more importantly public safety and the American people – cannot afford to wait,” Martin said. In the seven years since 9/11 we have experienced enormously destructive hurricanes and tornadoes and deadly bridge collapses. Fortunately we have not experienced another terrorist attack. Simply put, we cannot afford to wait until we do.”
Under the new plan, the FCC’s D-Block auction would provide options for national and regional licensing subject to relaxed buildout requirements and performance benchmarks (tied to population density) at various intervals throughout the 15-year license term. Long Term Evolution and WiMAX technologies could be used by winning bidders of licenses in 58 public-safety regions. The agency has proposed a cap of $48.50 that can be charged monthly to a first responder for accessing the public-safety/commercial network.
All options open
In reality, though, everything remains on the table for discussion. The FCC is seeking feedback on the role and makeup of the Public Safety Spectrum Trust Corp., the public-safety broadband licensee, and its agent, Cyren Call Communication Corp., in order to avoid conflicts of interest.
It is unclear – though becoming increasing doubtful – whether the FCC can craft final D-Block rules by year’s end, a goal sought by Martin that would enable the D-Block re-auction to be conducted by next June. The FCC asked for public comment on when the auction should be held after final guidelines are approved.
“The PSST is hopeful that today’s progress will result in rules bringing about the right partner or partners to build a shared public-safety/commercial network,” said PSST Chairman Harlin McEwen. The FCC’s latest plan proposes changes to PSST’s organizational structure “to enhance its operational efficiency and transparency.”
The PSST and much of the public-safety community support national licensing for the D Block.
Aside from the ongoing crossfire over the fine-tuning of D-Block auction and service rules, the overall lay of the land – now largely shaped by a financial crisis likely to play out in uncertain and unpredictable ways for months to come – appears to favor established wireless service providers.
“Until the capital markets stabilize, potential bidders other than those with strong cash positions will not be able to justify the cost of constructing a nationwide broadband network, nor will they have access to any risk capital to participate,” said Jessica Zufolo, a telecom analyst at Medley Global Advisors L.L.C.
Zufolo said Verizon Wireless is well positioned to capture D-Block spectrum, given the No. 2 carrier’s dominance in the 700 MHz open-access C Block.
