Auction Nears for Valuable Wireless Spectrum
The spectrum, in the 700MHz band, is highly coveted by a range of broadband providers, tech vendors and wireless voice providers for the ability of signals to broadcast long distances and penetrate buildings and other obstacles. With no other auctions of large spectrum blocks on the horizon, many organizations have pitched a range of conflicting ideas and auction conditions to the FCC.
"This particular spectrum ... is the single biggest and most valuable block of spectrum I can ever remember, and I've been in this for close to 40 years," said Morgan O'Brien, co-founder of Nextel and author of a much-debated spectrum proposal. "It's unbelievable spectrum, and of course, there's a lot of intense interest in it."
Advocacy groups such as Public Knowledge and Consumers Union say this auction represents the best and last opportunity for large portions of the U.S. to have a third broadband provider that competes with the cable and telecom giants. These groups are asking the FCC to require that part of the auctioned spectrum be sold with so-called open-access rules attached -- meaning the winner of the auction would have to sell wholesale access to the network to any company that wants it.
At the same time, large broadband and wireless providers argue that placing heavy conditions on the spectrum would decrease its value and would hamper their efforts to create next-generation services. While the FCC has often set some conditions for auctions, rules on how the spectrum can be used would decrease the number of bidders, suggest critics of open-access requirements.
The U.S. Congress has set a goal of raising US$10 billion, with about half going to reduce the U.S. government's budget deficit, but some observers expect the auction to raise billions more, if the FCC sets the right conditions.
Part of the spectrum, now used by U.S. television stations for over-the-air broadcasts, is targeted for public safety agencies such as police and fire departments. During the Sept. 11 terrorist attacks on the U.S., emergency responders found they couldn't talk to each other because they were operating a variety of incompatible communication devices in different areas of the spectrum.
In early 2006, after more than a decade of debate, the U.S. Congress voted to require television stations to move to digital broadcasts and abandon the 700MHz band between channels 51 and 69 by Feb. 17, 2009.
The move to digital television, or DTV, will free up about 84MHz of spectrum, with 24MHz set aside for public safety. The remaining 60MHz is set to be auctioned by early 2008.
Here are some of the ideas for the 700MHz spectrum auction:
One of the earliest proposals seeking changes to the congressional plan for the spectrum came from startup Cyren Call Communications Corp., founded by Morgan O'Brien. His plan, announced in April 2006, would take an additional 30MHz of spectrum for public safety, in addition to the 24MHz assigned by Congress.
The spectrum would be controlled through a public safety broadband trust at the FCC, and would be available for commercial uses after public safety agency needs are met.
Public safety officials embraced O'Brien's plan early, saying it offered them the spectrum they need. The plan found a cool reception in Congress, however, mostly because it would cost billions of dollars in lost auction proceeds.
While Congress has not moved to make the necessary changes to the digital television transition legislation that the Cyren Call plan would require, O'Brien said he's optimistic the FCC will adopt the "essence" of his plan. Frontline Wireless LLC, another startup founded by a group of tech and FCC veterans, made a similar proposal in February.
The Frontline plan has generated significant debate in Congress and in the broadband industry. O'Brien said the Frontline plan would accomplish many of the same goals, but he still believes his plan is better.
"We were building ... as much pressure as we could to get the relief we were looking for," O'Brien said. "When [Frontline] introduced their proposal, it relieved some of that pressure by diverting to a different model."
Frontline's plan would marry 10MHz of spectrum from the chunk to be auctioned with 12MHz assigned to public safety. That 22MHz would be auctioned, with the winner required to build a network that gives priority to public safety agencies. After public safety needs are met, the network could be used for commercial services, although Frontline has called on the FCC to require wholesale access for other providers.
Frontline has assembled a team of tech and wireless industry heavyweights, including CEO Haynes Griffin, founder of Vanguard Cellular Systems; Chairwoman Janice Obuchowski, former assistant secretary for communications and information at the U.S. Department of Commerce; James Barksdale, former CEO of Netscape; and L. John Doerr, a partner in the venture capital firm Kleiner Perkins Caufield & Byers.
The Frontline plan gives public safety the best chance for an interoperable, next-generation network, said Reed Hundt, Frontline's vice chairman and a former chairman of the FCC. The difference between the Frontline and Cyren Call proposals is that Cyren Call asked for a "government handout" of spectrum and money, while Frontline relies on private money to build the public safety network, Hundt said.
Verizon Wireless Inc. has opposed Frontline's plan, particularly its call for open access rules. Such rules would drive down the cost of the auction, said Dick Lynch, Verizon Wireless' executive vice president and chief technical officer, during a Senate hearing in June.
But Verizon wants an auction that favors large providers, Hundt countered. "The way to get a really low price for the treasury is to say Verizon can have it all, because nobody will bid," he said. "Verizon wanted to buy all the spectrum and put it in the bottom left-hand drawer. It's an effort to monopolize."
Verizon has generally declined to comment about the 700MHz auction, but Lynch, in his June testimony, called on the FCC to auction a 20MHz block of spectrum that can be used across the U.S. This would allow the U.S. to "lead the world" in fourth generation wireless deployment, he said.
Verizon also opposes open access rules, similar to net neutrality rules proposed by some consumer and advocacy groups for existing broadband networks. "The auction needs to make the spectrum available in ways that will promote, not cripple, broadband," Lynch said. "The commission should set auction rules that allow for full and fair competition by qualified bidders, without artificial and unwarranted constraints."
Past competition auctions without such conditions have created a competitive wireless marketplace offering a "broad range of digital offerings," Lynch added.
Several conservative think tanks and advocacy groups have also opposed the Frontline plan.
Public safety groups are not united in their views on the 700MHz auction, particularly since it became clear that Congress would not support the Cyren Call plan. However, some public safety groups have warmed to the Frontline proposal.
Frontline has recently embraced the idea of a public safety board that would oversee the network to be built, said Charles Werner, fire chief in Charlottesville, Virginia, and a member of the International Association of Fire Chiefs Communications Committee.
The Frontline proposal represents "a perfect storm" that represents the best chance of a national broadband network for public safety, he said. "It also builds off a commercial model, which means you have this ever-evolving network that gives public safety ... all those technology advances that they otherwise would never have."
Without something like the Frontline plan, a public safety network may never get built, Werner said. Congress, with many other priorities, doesn't have the political will to build and maintain a national network, he said.
"We do not want a national broadband network built and funded by the government," he said. "This is something that's going to have to be maintained from this point on. You can't have that kind of network based on decisions that are going to change."
Other public safety officials have opposed the Frontline plan, saying it takes away local control of the network.
Save Our Spectrum Coalition
Leading the charge for open access rules are a group of consumer and advocacy organizations, including Public Knowledge, Consumers Union, and the Consumer Federation of America. The Ad Hoc Public Interest Spectrum Coalition has asked the FCC to include open access rules with 30MHz of the auctioned spectrum.
The coalition has also asked the FCC to require anonymous bidding, instead of its past practice of revealing bidders. Anonymous bidding would prevent auction participants from engaging in retaliatory bidder, the coalition argued.
The FCC should act "both to ensure that new spectrum is offered on an open and nondiscriminatory basis and to bring in new entrants interested in challenging the current cozy wireless oligopoly and broadband duopoly," the coalition wrote in comments to the FCC. "The 700 MHz auctions will not give birth to the much anticipated third pipe if the licenses are auctioned to the very same ... telephone and cable incumbents that dominate the wireline market."
Finally, Google Inc. has asked the FCC to allow what it calls dynamic auctions of spectrum. The Google proposal would allow, but not require, winners of the spectrum auction to create their own real-time auctions. Wireless and broadband providers and customers could bid in real-time auctions for the right to use a piece of spectrum for a given period of time. A customer could pay a few cents per minute to access the spectrum, Google said.
"Maybe there's a different way of providing spectrum," Whitt said. "I think most people will believe this is the wave of the future. You have to provide the most compelling service, and users will come to your door."