It’s still seemingly early in the game, but bidding in the Federal Communications Commission’s 700 MHz auction is materializing into a good news-bad news auction of epic proportions.
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In less than two dozen rounds, bidding shattered the $13.8 billion mark of the advanced wireless services auction in 2006. The auction stood at more than $18 billion following 26 rounds of bidding at the end of last week. It took 161 rounds to reach that level for the rights to 90 megahertz of spectrum in the 1.7/2.1 GHz bands, half of which is being cleared of federal government users. The 700 MHz auction – comprising 62 megahertz of propagation-friendly spectrum to be returned by broadcasters next year – has already exceeded the projected high of $15 billion. It likely won’t be long before the 700 MHz auction rings up $20 billion in bids. Because so much valuable spectrum is unlikely to go on the auction block anytime soon, it is unlikely the record revenue proceeds from the 700 MHz will ever be topped.
Open access achieved
Another achievement was meeting the $4.6 billion reserve price for the nationwide package of eight regional C-Block licenses, trigging an open-access condition on one-third of the spectrum being auctioned. Had that threshold not been met, the open-access requirement would have disappeared and the spectrum re-auctioned. There has been speculation Google Inc., which joined public-interest and consumer groups in pressing for wireless open access, would bid just enough on the C Block to enable open access to kick in and then sit back to see if Verizon Wireless or some other bidder raises the ante. But it’s not known who is bidding on the C Block or any other licenses as the FCC is keeping bidders’ identities secret until after the auction to guard against collusion.
“This is an important transformation for the auction and for the wireless industry,” said Kevin Martin, chairman of the GOP-led FCC, on the triggering of the open-access provision. “I think this just demonstrates the continuing pattern that we’ve seen since the commission adopted these rules last summer of further increasing the openness of the wireless networks.” Martin noted that before the auction began Jan. 24, AT&T Mobility and Verizon Wireless – the two largest wireless carriers – said they would allow third-party devices and applications to connect to their networks, and that Sprint Nextel Corp. and T-Mobile USA Inc. had joined the broad-based Android alliance to develop an open platform for mobile devices.
Like Martin, Commissioner Michael Copps, a Democrat, said 700 MHz bidding proved C-Block naysayers wrong.
“It’s interesting to reflect that, just a few months ago, critics were saying that open access would be bad for consumers and carriers, possibly even leading to network service disruptions,” said Copps. “Since then, most of the major carriers have voluntarily adopted some form or another of open access. [Last week’s] auction news continues this progress by writing openness principles into law for 22 megahertz of particularly valuable commercial wireless spectrum.”
Not all convinced on open access
The Public Interest Spectrum Coalition applauded the open-access development in the 700 MHz auction, but said it did not like how the FCC went about achieving it.
“The fact that bidders met the $4.6 billion threshold is a welcome development for consumers,” the group said. “The winner of the auction will be required to offer consumers more options for devices and more choice among wireless applications than wireless companies do now. We hope that the freedom that will develop as the new spectrum opens up will carry over into the existing cellular network.”
“At the same time,” the coalition added, “we shouldn’t lose sight that setting a reserve price in the first place was a bad public policy particularly where important publicinterest conditions are attached to the license. As the Communications Act suggests, the purpose of the auction is not to maximize short-term revenue for the government but to put the spectrum in the hands of a purchaser which believes it can maximize its utility for consumers and the public interest.”
Ben Scott, policy director of PISC member Free Press, said open access shouldn’t end with the C Block.
“This is just the beginning. This auction signals that the Internet marketplace – and the public polices that shape it – should now move decisively toward universal openness,” Scott said. “If open devices and applications are good for consumers in the networks built on 700 MHz spectrum, why not for all mobile networks? These conditions should be applied across the board so that consumers can benefit immediately from more choice and competition.”
D-Block blues
Then there’s the D-Block national commercial/public-safety license, languishing as of round 26 without a new bid since round one when it received a $472 million offer. That’s far below the $1.3 billion reserve price set for the license.
Martin said he remains optimistic a bidder would come forward to meet the reserve price for the DBlock license. FCC rules do not dictate that any particular action be taken if the reserve price is not met, only that agency officials review the situation before deciding what to do next. Martin has not given any signals that he plans to back away from the public-private sector approach for the D Block, though he could be forced to take steps – such as lowering the reserve price and/or easing public-safety requirements – if the spectrum is re-auctioned.
Martin said he would work with Congress to explore options for the D Block if no bidder agrees to pay the minimum price for the license.
On a related front, Harlin McEwen, chairman of the Public Safety Spectrum Trust, said the group reached a formal agreement with Cyren Call Communications Corp. regarding the latter’s role as an advisor. McEwen said Cyren Call, led by industry veteran Morgan O’Brien, arranged a loan from venture capital firms to fund the PSST through the end of the auction. He said the PSST, a nonprofit umbrella public-safety organization and the 700 MHz national public-safety broadband licensee, could receive a second loan depending on whether a D Block winner emerges. The D-Block licensee must negotiate a network-sharing agreement with the PSST.
