FCC chief says economy could hurt wireless sale
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The head of the Federal Communications Commission expressed concern on Tuesday that the credit crunch could hinder bidders in an upcoming government auction of wireless airwaves.
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Bidding remained stalled Tuesday on  a key piece of spectrum in the government's wireless airwaves  auction, prompting concern regulators will have to modify rules  requiring some of it be shared with public safety agencies.
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Several companies have challengedÂ spectrum auction rulesÂ recently set by the U.S. Federal Communications Commission, with Frontline Wireless protesting that the auction of the 700MHz band to be auctioned in January could shut out small bidders.
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The cellular services have promised to open their networks, but progress must be monitored, an FCC commissioner says.
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The chief executive of Freddie Mac   warned that the U.S. economy faces a 40 percent to 45  percent risk of recession induced by the housing market  downturn, the Financial Times reported on its Web site.
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Rural mobile operator would likely carry a high price, which has two analysts split over whether Verizon Wireless will be the buyer.
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Depending on who's talking, the wireless spectrum auction that starts on Jan. 24 will significantly change the mobile and wireless landscape in the U.S., or it won't have much impact at all.Some believe it will lead to creation of new nationwide wireless networks and the entry of new wireless operators. That increased competition could benefit users."This spectrum auction is the first real chance we've had to see a competitor emerge that could compete with the telephone and cable companies," said Gigi Sohn, president of the Public Knowledge consumer rights organization. Aggressive bidding is expected from several well-funded companies that aren't currently in the wireless business, such as Microsoft co-founder Paul Allen's Vulcan Spectrum and Google.Others, however, beg to differ. "The auction won't change anything per se," said Jack Gold, principal of J. Gold Associates, a telecommunications consulting firm. "But other pressures in the system -- market forces -- could ultimately change a lot of things." For example, Gold said he expects more competition and more open wireless networks to emerge over time, no matter who wins the auction.Besides the possibility of new competition, this auction is also receiving a lot of attention because it is likely to be the last time that large chunks of wireless spectrum will become available. Also with this auction, the Federal Communications Commission (FCC) has imposed rules that will, to some extent, open up wireless networks.However, a lot of confusion about the auction remains. Here are the answers to some frequently asked questions.What is being auctioned?The FCC is auctioning off a huge swath of wireless spectrum in the 700-MHz range. This spectrum has been used by television broadcasters, which must return the spectrum to the FCC when they switch next year from analog to digital broadcasts.In particular, the FCC is auctioning many "blocks" of spectrum. Two of those blocks, the so-called C-block and D-block, have enough capacity and geographical coverage to create nationwide wireless networks. The smaller blocks of spectrum also could receive a lot of attention from bidders. Those blocks are regional in nature, and many small telecommunications providers are expected to bid on them.How is the 700-MHz portion of spectrum different than others?The physical nature of the 700-MHz spectrum makes it attractive to users and service providers alike. Many digital cellular systems in the U.S. use radio signals in the 1,800-MHz and 1,900-MHz ranges, although some older analog systems still use spectrum in frequencies as low as 800 MHz. Because radio waves in the 700-MHz range are physically longer than higher-frequency radio waves, they travel farther and are better able to penetrate walls and other impediments.These characteristics are important for several reasons. First, the better penetration makes it feasible to use wireless services indoors. That makes these wireless services competitive with land-line broadband services such as Digital Subscriber Line and cable.A second important advantage is that, because radio waves in this portion of spectrum travel farther, it is easier to bring wireless access into rural areas that currently aren't well served by wireless providers. This greater transmission range also means that operators would need to invest less in towers and base stations and other wireless infrastructure.These advantages, combined with the nationwide coverage, explain why the available 700-MHz spectrum is often referred to in the media as "beachfront property."What technologies can be used in this portion of spectrum?Virtually any wireless technology that is currently in use can also be used in the 700-MHz range. That includes traditional and next-generation cellular service and other wireless broadband technologies such as WiMax.What potential benefits could come from this auction?Besides increased competition, the FCC decreed that the winner of the C-block must make networks that use that portion of spectrum available to any device that employs compatible technology. For example, if a carrier builds an EV-DO 3G (Evolution Data Optimized third-generation) network, any device with that technology built in will be able to access the network.This openness will increase consumer choice. Currently, cellular operators in the U.S. typically limit what devices can be used on their networks and what applications can run on those devices. Because this approach gives them so much control, the incumbent carriers fought the open network provision vigorously.Note, however, that this provision applies only to the C-block. Carriers that win any of the other blocks can continue to limit access to those networks.What other rules apply to the spectrum?The effort to open up new spectrum to all devices was led by Google and several public-interest organizations. In addition, those groups urged the FCC to require that the winning bidders make some spectrum available, on a wholesale basis, to other carriers. That was another attempt to foster more competition among wireless carriers. However, this effort failed. The FCC refused to require winning bidders to resell some of that spectrum although, as always, that could occur voluntarily.There are other limits on how the spectrum can be used. One notable mandate is that any network using the D-block must be built to specifications particular to public safety applications and that portions of the spectrum are available for those uses. Because of the emphasis on public safety, the D-block is mandated to be available to 99.3% of the U.S. population by 2019.There are limits on the other blocks, too. For instance, there are use-or-lose provisions that require wireless networks to be built out within a certain time frame or the license will be lost. This is an attempt to make sure that large companies don't buy spectrum simply to block other companies from acquiring it.Who is bidding?The auction has attracted some predictable bidders, some surprise bidders and many smaller bidders. More than 260 applications to participate in the bidding process were initially submitted to the FCC. The predictable companies included incumbent telecommunications operators such as Verizon Communications and AT&amp;T.Then, there are some well-funded bidders with unknown motives, such as petroleum giant Chevron and Vulcan Spectrum. Also in the mix are some cable operators.Besides the big players, many local and regional wireless carriers have applied to participate in the auction and are likely to bid on the regional chunks of spectrum. A local telephone company, for instance, could use such spectrum to provide wireless broadband service to its local customers using a technology like WiMax.What about Google's bid?The potential bidder that has received the most attention is Google, which has been mum about its specific plans. Most observers believe the company's interest in the auction is tied to its recently announced Linux-based Android mobile phone system.Google likely wants to use Android to sell mobile advertising. However, that won't be successful if existing wireless carriers don't allow phones based on it to be used on their networks. If Google owns the open C-block, it will be certain that phones based on its Android system can be used.Few, however, expect Google to create a whole new wireless network from scratch -- if it wins."Google will rent out the spectrum, said consultant Gold. "It would be insane on their part if they decided to put up their own network. Being landlords of the airspace, that makes sense."As a result, it is widely expected that, if Google wins the C-block, it will work with other providers. For instance, rumors have been circulating that Google will work with T-Mobile USA, which has been constrained in expanding its network by a lack of spectrum. Neither company has been talking about such specifics.How will the auction be conducted?A "mock auction" will be held on Jan. 22, and the auction will begin in earnest two days later. Many observers believe the bidding, which will be largely electronic, could last a couple of weeks.Bidding will be anonymous. That is to say, nobody will know who is bidding or how much they are bidding. The goal of this rule is to prevent collusion aimed at keeping out specific bidders."There are quite a few studies that show that, if you know who is bidding, you can engage in anticompetitive blocking behavior," said Public Knowledge's Sohn.How much will spectrum cost?Buying spectrum will require very deep pockets. In particular, the large, nationwide spectrum blocks will surely be expensive. The C-block, for instance, has a reserve, or floor, bidding price of about $4.7 billion. The total reserve price for all blocks is about $10 billion, and many believe the bidding will go much higher than that.
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Policy analyst Randolph J. May says the FCC needs to revise set-top equipment rules, or costs to consumers will be great.
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If the FCC's auction of former UHF bandwidth were to end here, it might raise over $19 billion. But with bidding activity slowing to a crawl, the Commission has one more tool in its arsenal to squeeze out some more value.
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Within weeks, the U.S. Federal Communications Commission is expected to set conditions for the auction of the most valuable wireless spectrum still available in the U.S.
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The debate over post-9/11 communications, network neutrality, and high-speed wireless is now centered around a struggle over the 700-MHz band going on in Washington, D.C. On Thursday, a hearing by Senate Commerce Committee over the upcoming 700-MHz auction raised several key issues.
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(InfoWorld) - A plan to have private investors build a national wireless broadband network for police and fire departments met resistance at a U.S. Senate hearing Thursday, including from the man in charge of New York's emergency broadband network. Startup Frontline Wireless, backed by two former U.S. Federal Communications Commission (FCC)Â chairmen and several tech industry heavyweights, would set aside 22MHz of wireless spectrum from an upcoming auction of the 700MHz band for a dual-use commercial and emergency response network with the winning bidder required to build a nationwide network that would give priority to police and fire departments. A national broadband network for emergency response agencies would take billions of dollars to build, and a public-private partnership like the one Frontline has proposed is the only way it will happen, said James Barksdale, president and CEO of investment group Barksdale Management and a partner in Frontline. The U.S. government lacks the money to build the network, he said. "We're not asking agencies to give us the spectrum," Barksdale said. "And public safety gets a free ride on it -- that's a heck of a deal." Six years after the Sept. 11 terrorist attacks on the U.S. and two years after Hurricane Katrina, emergency response agencies across the U.S. still do not have broadband networks that allow agencies to talk to each other, said Barksdale, former CEO of Netscape. "The FCC can achieve, at no cost to taxpayers, an interoperable public safety network that, I submit to you, will never be built if we don't do it this way," Barksdale told the Senate Commerce, Science, and Transportation Committee. "We are long past the time to talk about what might happen or should happen or is going to happen for public safety. Any serious proposal must address how this costly network will be funded and built without relying on government funds." But several people at the hearing, including Paul Cosgrave, commissioner of the New York City Department of Information Technology and Telecommunications, questioned the Frontline plan. New York has already built a $500 million emergency network that will roll out fully in early 2008, and the Frontline proposal could take away local control of emergency communications networks, he said. Spectrum that's optimal to use for emergency communications in New York may not work for Boise, Idaho, he said. "A national network, based on a one-size-fits-all approach, may not meet the disparate communication needs of emergency responders throughout the country," Cosgrave said. In addition, if emergency responders must share spectrum with commercial providers, the network may be jammed during disasters, Cosgrave said. The proposed network will be "dominated by commercial interests, and deployment and maintenance will be undertaken based on return on investment rather than effective emergency response," he added. The Frontline plan would take 10MHz from 60MHz scheduled to be auctioned by early next year and pair it with 12MHz of spectrum out of 24MHz set aside for public safety. The 84MHz of spectrum is becoming available after Congress voted early last year to require U.S. television stations to abandon the spectrum and move from analog to all-digital broadcasts. The deadline for the transition to digital TV is in February 2009. Under the Frontline plan, the winner of the auction for the 22MHz would be required to build a national broadband network, estimated by Barksdale to cost $12 billion. The network operator could then collect wholesale fees from emergency response agencies and from commercial telecoms that want to use the spectrum to provide broadband services. Frontline is also asking the FCC to create rules that would require the winner of the 22MHz chunk of spectrum to resell access to any customer that can pay. Several consumer groups and tech companies have also called for open access provisions for part of the auctioned spectrum, saying it represents the best chance for a new national broadband provider that would compete with cable and telecom company offerings. The FCC is expected to set service rules on the spectrum to be auctioned within weeks. Representatives of two wireless carriers told the committee they oppose open access rules in the auction. Dick Lynch, executive vice president and CTO at Verizon, suggested open access and net neutrality rules called for by several groups would limit the appeal of the spectrum and drive down the cost the U.S. government receives in the auction. The auction is expected to raise at least $10 billion with many observers suggesting much more money will be bid. "The auction must make the spectrum available in ways that will promote, not cripple, broadband deployment," Lynch said. [Open access and other] requirements are unwarranted, would deter innovation, and would not benefit consumers." Senator Ted Stevens, an Alaska Republican, also questioned the Frontline plan, saying the proposal doesn't address how local police and fire departments will pay for handsets and other equipment used to access the network. The best way to raise money for public safety equipment is to maximize the value of the spectrum at auction, he said. "There's no reason this [spectrum] shouldn't go into the private sector and be profitable, too," he said. Several Democratic senators and Wanda McCarley, president of the Association of Public-Safety Communications Officials International, were more receptive of the Frontline plan. The proposal includes many ideas that many emergency response officials want, McCarley said. "With this auction we stand at a crossroads," added Senator John Kerry, a Massachusetts Democrat. "Either we can provide extraordinary benefits to millions of Americans, or we can tilt the broadband policy to improve the already significant position of the powerful few that deliver this service. I think there's a clear path that we have to take -- the airwaves belong to the American people."
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The Republican chairman of the Federal Communications Commission is disputing Democratic assertions that a new rule loosening restrictions on media ownership is full of loopholes and will lead to a wave of mergers and fewer choices for consumers.
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Open access advocates say an FCC plan for new spectrum doesn't go far enough.
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A Verizon Wireless executive scoffed at the notion that iPhone will take customers away from his company.
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Verizon Wireless Inc. has encountered strong opposition for its request that an appeals court overturn U.S. Federal Communications Commission auction rules on a portion of wireless spectrum.
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The head of the Federal  Communications Commission is pressing for the agency to quickly  approve plans by AT&T Inc to purchase $2.5 billion worth of  wireless airwaves from a privately held partnership, sources  said on Friday.