Report Sheds Light on Failure to Sell Safety Spectrum

Lease payments sought by public-safety agencies on an adjoining block of spectrum were not the only factor in the failure of a portion of wireless spectrum to sell in the U.S. Federal Communications Commission's recent 700MHz spectrum auction, the FCC's inspector general said Friday.

The Public Safety Spectrum Trust (PSST), a coalition of 15 public-safety groups, did discuss potential lease payments of about US$50 million a year with two potential bidders for the so-called D block of spectrum, but that request for payments was among "a host of problems" that potential bidders saw, FCC Inspector General Kent Nilsson said in a report.

The D block auction was watched closely because many lawmakers and public-safety officials pushed for a nationwide network to be created after emergency responders couldn't communicate with each other during the Sept. 11 terrorist attacks and more recent disasters. Police and fire departments in neighboring cities often use different communication devices on different blocks of spectrum.

The FCC had designated the D block, a 10MHz band of spectrum, to be paired with another 10MHz band controlled by the PSST in the 700MHz auctions that ended in mid-March. The winning bidder would have been required to build a nationwide network to be shared between public-safety needs and commercial wireless services, but the D block failed to attract the minimum bid of $1.33 billion set by the FCC.

After the auction ended, some U.S. lawmakers and advocacy groups complained that Cyren Call, a group advising PSST, had demanded lease payments from the winning bidder. Those and other demands discouraged bidders, including startup Frontline Wireless, who had expressed interest in the D block but backed out days before the auction began in January, the advocacy groups said.

PSST and Cyren Call "set conditions before the auction took place which no commercial company in its right mind would even think about meeting," Art Brodsky, spokesman for Public Knowledge, wrote in a blog on March 26.

Cyren Call representatives have denied that they demanded lease payments, saying they did discuss the possibility of lease payments with potential bidders. The FCC allowed PSST to set up bidding guidelines before the auction began, and the lease payments were part of that process, Cyren Call Chairman Morgan O'Brien has said.

Nilsson's report seems to confirm O'Brien's story.

Cyren Call met with Frontline and Verizon to discuss spectrum lease payments of about $50 million a year, the report says. Frontline officials said "that the lease payment amount was only one of many factors it considered in deciding whether to participate in the D Block," the report says. "Witnesses from all of the entities interviewed also described a host of problems and concerns with the D Block that, as a whole, deterred their participation in the D Block."

Other rules contributed to a lack of bids, the report says. Bidders were concerned about the cost of building a nationwide network and that they could lose up-front payments if their negotiations with PSST on how the network should be built failed, Nilsson's report says. Bidders were also concerned about the cost of maintaining the network.

The FCC has not yet decided what to do with the unauctioned D block.

Bids for the 700MHz spectrum totalled $19.6 billion. The D block received one bid for $472 million.

Many telecom experts see the 700MHz spectrum, which U.S. television stations are required to abandon by February 2009, as optimal for long-range wireless broadband services. Wireless signals in the 700MHz band travel three to four times farther and penetrate obstacles such as buildings more easily than wireless signals in higher spectrum bands.

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