SO WHAT WILL IT BE for the sequestered 700 MHz D Block? A few tweaks here and there, an approach one lawmaker dismissively coined ‘D Block lite’? A complete overhaul? Or something in between?
That’s the predicament facing the Federal Communications Commission in the aftermath of the failure to attract a bidder willing to cough up $1.3 billion for the national commercial/public- safety license in the recently completed 700 MHz auction. Last week’s House telecom subcommittee hearing generated a handful of ideas on how to craft rules for the D-Block re-auction. Interspersed in the brainstorming session were assessments of what went right and what went wrong with the auction. In the end, nothing close to a consensus emerged.
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No ‘magic bullet’
“Congress has not made up its mind what is the magic bullet solution,” said Carol Mattey, managing director of telecom regulatory consulting at Deloitte Touche and a former FCC official.
The 700 MHz auction has done more than just refocus attention on the D Block. It also has created an opening for lawmakers and other stakeholders to revisit a host of other wireless issues including industry consolidation, roaming, open access, wholesale, broadband competition and ownership diversity.
“In wireless, we have a new opportunity with the ‘beachfront’ property of the spectrum,” said Rep. Edward Markey (D-Mass.), chairman of the House telecom panel. “And what is the result so far? At present, it looks like two mega-resorts are going up on the beachfront in the form of Verizon and AT&T, solidifying their wireless
market and spectrum real estate positions. Yes, Echostar has won almost a nationwide footprint – not to compete with Verizon and AT&T in the mobile wireless market – but rather to have spectrum as an adjunct to their satellite television service. .Women-owned and minority-owned businesses did not break through. There is no new national competitor to provoke new broadband competition, innovation, and consumer choice coming out of the auction. As a result, the wireless ‘third pipe’ to compete with the telephone and cable industry is proving either elusive – or simply allied with one of the two existing providers in much of the country. This is too cozy and not nearly competitive enough.”
Any and all options
Markey said the decision by the FCC under former chairman Michael Powell to repeal the spectrum cap has proven to be ill-considered.
“The FCC must revisit these policy decisions in light of the recently completed auction and take corrective action going forward,” the Massachusetts lawmaker stated. “The commission has the responsibility to learn from the licensing mistakes of the past and to widely disseminate licenses and promote greater broadband competition and should endeavor to do so.”
Markey and other lawmakers – as well as FCC Chairman Kevin Martin – said the commission should not abandon the public-private partnership approach as federal regulators consider changes to the D Block. Suggestions include lowering the $1.3 billion reserve price for the license, recalibrating buildout and service requirements, modifying the penalty associated with failure of the D-Block winner to negotiate a network-sharing agreement with the public-safety broadband licensee, and clarifying upfront the obligations of the private-sector partner.
“Any and all options should be on the table,” Martin told subcommittee members.
Muddy waters
Whether other wireless issues will muddy the waters in fashioning new D-Block guidelines remains to be seen. Time is not on the FCC’s side. Martin told House telecom committee members he wants to re-auction the D Block later this year, a timeframe that roughly coincides with the presidential election.
Though bidding rang up a record $19 billion, some lawmakers and one witness suggested the FCC could have generated far more revenue if conditions had not been attached to key 700 MHz licenses.
Arm-chair quarterbacking
Rep. Cliff Stearns (R-Fla.) said the D Block should be re-auctioned without any conditions and the proceeds given to public-safety agencies, a move that would require legislation.
Harlin McEwen, chairman and CEO of the Public Safety Spectrum Trust Corp., said he doubted a straight-forward D-Block auction could raise adequate funds for a capital-intensive public-safety undertaking estimated to cost at least $6 billion. The PSST is the FCC-approved 700 MHz public-safety broadband licensee.
“The auction raised $19 billion, and that’s great, but it should have raised a lot more,” said Rep. Joe Barton (R-Texas), ranking member of the House Commerce Committee. “True, the Congressional Budget Office estimated the auction would raise $12.5 billion. But other studies estimated that, without the conditions – the spectrum would raise $25 (billion) to $30 billion. I think that the higher estimates would have been about right based on the results where the C-block revenue was about half of what many folks thought, and the D Block did not sell at all.”
Verizon Wireless won a nationwide collection of regional C-Block licenses, which are subject to an open-access condition. The No. 2 cellphone carrier is also taking steps to open its existing network to third-party devices and applications. Other national cellular carriers have indicated they are moving in the same direction. House lawmakers said they will closely monitor industry commitments on open platforms.
Public-safety groups quickly scrambled to salvage support for a private-sector-funded national wireless broadband network shared by first responders and a commercial entity.
“APCO International believes a public-private partnership between the D Block and public safety is currently the most viable option for funding and deployment of a national interoperable broadband network for public safety,” said Willis Carter, president of the Association of Public-Safety Officials International. “The FCC should move with all deliberative speed while ensuring that public-safety needs are addressed.”
“While we must learn from the recent auction experience, NENA remains convinced that a public-private partnership between the commercial D Block licensee and public safety is currently the most viable option for funding and deploying a national interoperable broadband network for public safety,” said Jason Barbour, president of the National Emergency Number Association. “We encourage the FCC to move forward diligently while ensuring that public-safety’s need for an advanced next-generation wireless broadband network is realized.”
House Commerce Committee Chairman John Dingell (DMich.) grilled Cyren Call Communications Corp. Chairman Morgan O’Brien about his company’s relationship with the PSST and pre-auction talks with prospective bidders that revolved around a proposed $50 million-a-year lease payment the D-Block winner would owe the PSST for access to 700 MHz public-safety frequencies. Cyren Call is the official advisor to the PSST. Cyren Call, funded by several venture capital firms, has made at least one loan to the PSST. Dingell requested documents related to financial arrangements Cyren Call has with the PSST and VC backers.
“Frankly, this entire arrangement puzzles me,” Dingell said.
O’Brien said Cyren Call did not demand payments from Frontline or any other prospective D-Block bidder. O’Brien and McEwen agreed to supply documents sought by Dingell.
The FCC and Congress are investigating allegations surrounding the D-Block failure, including the abrupt collapse of Frontline Wireless L.L.C. – a one-time, leading D-Block candidate – shortly before the Jan. 24 start of the auction. The FCC’s Martin said he will await the results of the agency’s inspector general probe before initiating a new rulemaking on D-Block rule changes.
