FAQ: Inside the FCC's High-Stakes 700-MHz Spectrum Auction
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The FCC auction of 700-MHz spectrum, which started January 24, is one of the biggest sell-offs of radio spectrum in years, and it's expected to raise at least $10 billion. Wired News explains what's at stake with this list of questions and answers.
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Range wars The US auction of AWS (Advanced Wireless Services) spectrum in the 1.7GHz and 2.1GHz bands is finally drawing to a close, raising a likely $14bn for the government in the sale of the largest block of spectrum (1,112 licenses) offered by the FCC regulator.â¦
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AT&T, Verizon Wireless, Google and Chevron are among the applicants for next month's 700MHz spectrum auction.
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The Federal Communications Commission is set next month to decide how to auction spectrum to wireless carriers to bring high-speed Internet service to  airlines as early as next year. But, regulators have been boxed into a corner: promote low prices and great features, or ensure the service works reliably.
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The FCC's auction of prime wireless spectrum could create new competition for broadband Internet. Or not. The bidding rules will be key.
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The maverick network service provider run by former Netscape CEO Jim Barksdale, and that was largely responsible for convincing the US Federal Communications Commission to impose new and innovative rules for bidders on certain blocks of the 700 MHz UHF spectrum, is now saying it may not be able to bid after all. In a formal complaint to the FCC filed Monday, lawyers for Frontline Wireless accused the FCC of "getting it wrong" by having set the asking price of the choicest blocks in the auction too high.
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(InfoWorld) - Google and Intel have already expressed interest in the forthcoming 700MHz spectrum auction. Now, speculators say Apple may throw its hat into the ring. TheÂ auctionÂ is creating a bit of a frenzy because the winner will obtain some of the last available prime spectrum, ideal for delivering broadband wireless Internet access. The U.S. Federal Communications Commission (FCC) expects to auction it off next year. While Google has said that it may bid in the auction, Apple's participation is pure speculation, and analysts appear split on whether it makes sense for theÂ iPhoneÂ maker to become a network operator. Apple's entry into the carrier business, while interesting to speculate, is difficult to imagine since the company already has a "sweetheart deal" with AT&T, said Michael Gartenberg, an analyst with Jupiter Research. In an unusual arrangement for the mobile industry, Apple is thought to receive a portion of the monthly service revenue that AT&T earns from iPhone customers. AT&T is the iPhone's exclusive carrier. Gartner analyst Van Baker finds it "highly unlikely" that Apple would be interested in buying the spectrum. "It's a very different business than they're in, and it's not something they have a whole lot of expertise in," he noted. Apple could decide to partner with another company that has more experience in the mobile operator business, which could make more sense, Baker said. Still, the arrangement between Apple and AT&T looks beneficial to both companies, so there probably isn't a significant incentive for Apple to want to change that setup, especially because the operator business comes with "lousy margins," he said. However, Apple might have at least one good reason for wanting to operate a network, said Avi Greengart, an analyst with Current Analysis. "They do like to control the end-to-end experience," he said. While becoming a mobile operator would be a "tremendous stretch" for Apple, it wouldn't surprise Greengart if Apple was considering it. An Apple network would likely be very tightly integrated with Apple products and come with very simple pricing, he said. Such a strategy could have a ripple effect across the industry. Operators tend to watch what competitors are doing and make adjustments to their own strategies accordingly, he said. Greengart and the others cautioned that they hadn't heard directly from the company or other sources that Apple was considering the auction. "But they're pretty good about being tight-lipped," Greengart said. Apple is known for being very secretive, with big announcements leaking out only days in advance, if ever. BusinessWeek first reported on the rumor that Apple might be interested in the spectrum auction.
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On Thursday, the Federal Communications Commission will auction off what industry observers call the "sweet spot" of the wireless spectrum -- the 700-MHz block formerly occupied by television broadcasters. Among the bidders are some 214 companies, including Verizon, AT&T and, most famously, Google.
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Carnegie Mellon professor and telecommunications expert David Farber explains what's at stake in the January 2008 FCC auction of spectrum in the 700-MHz band -- spectrum that Google has expressed interest in.
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Frontline Wireless, a startup that had planned to bid in the U.S. Federal Communications Commission&#39;s upcoming&#160;700MHz spectrum auction, has &quot;closed for business,&quot; a spokeswoman said Wednesday.Frontline, backed by veterans of the wireless industry and U.S. government, was one of the major advocates of a plan for the FCC to pair about 10MHz of spectrum set aside for emergency response agency communications to another 10MHz to be sold in the auction starting Jan. 24. The auction winner would then be required to build a wireless network that emergency responders such as police and fire departments could share with commercial interests.Frontline had also pushed the FCC to adopt so-called&#160;open-access rules&#160;on part of the 62MHz of spectrum to be auctioned.The FCC in July largely adopted the emergency communications auction plan advocated by Frontline and other groups, and it approved an amended open-access plan on 22MHz of the spectrum. The FCC required that the winner of the 22MHz allow any wireless devices to connect to the network, meaning wireless telephone customers could bring their handset devices from other carriers. The FCC also prohibited the winning bidder on the 22MHz block of spectrum from blocking or slowing wireless and Web content from competitors.Frontline spokeswoman Mary Greczyn said Wednesday the company would have no further comment beyond saying Frontline is &quot;closed for business at this time.&quot;Up-front payments for bidding in the 700MHz auction were due Jan. 4. The up-front payment for the D block, the spectrum for emergency communications, was $128.2 million, and the payment for the 22MHz C block was $282.1 million.Frontline, based in Greensboro, North Carolina, first made a splash in early 2007, when it&#160;proposed an open-access network&#160;that emergency responders would share with commercial providers. Frontline said then it planned to offer wholesale access to the network to other wireless providers.Frontline was backed by several heavy hitters in the wireless and tech industries, as well as former senior U.S. government officials. Haynes Griffin, founding CEO and president of Vanguard Cellular Systems, served as Frontline&#39;s CEO, and Janice Obuchowski, former head of the U.S. National Telecommunications and Information Administration, served as the company&#39;s chairwoman. Reed Hundt, a former chairman of the FCC, served as Frontline&#39;s vice chairman.James Barksdale, former CEO at Netscape, and John Doerr, a partner in the Kleiner Perkins Caulfield &amp; Byers venture capital firm, were among the company&#39;s backers.
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(InfoWorld) - A $1.3 billion reserve price for a piece of wireless spectrum to be auctioned by the U.S. Federal Communications Commission in January is too high, according to one company interested in the spectrum. The FCC has proposed the reserve, or minimum price, of about $1.3 billion for a 10MHz portion of spectrum to be paired with 12MHz set aside for emergency response communications. With that 22MHz of spectrum, the winning bidder will be required to build a wireless network to be used by public safety provider and for commercial wireless communications. But Frontline Wireless,Â the startup that pushed the public safety plan, said Tuesday the FCC's reserve price for the so-called D Block of spectrum is "unprecedentedly and irrationally high." The winning bidder will be required to build out a national network costing billions of dollars, Frontline argued in a brief it filed Friday. Many bidders "will hold back bids in the initial action to prevent the reserve from being met," Frontline said. "They will withhold higher bids until the re-auction when there will be weaker service rules ... and fewer competing bidders." Frontline was one of 13 groups that filed comments by Friday's deadline on theÂ FCC's auction plan, released earlier in August. The FCC is schedule to auction 62MHz of spectrum in the 700MHz band beginning Jan. 16. The FCC set a reserve price of $10 billion for the entire 62MHz, but many observers believe the auctions will raise much more than that. The spectrum is currently controlled by U.S. television stations using channels 52 to 69. The U.S. Congress in late 2005 passed legislation that requires the stations to move to digital broadcasts and abandon spectrum in the 700MHz band by February 2009. Among other comments filed were ones from the Coalition for 4G in America, whose members including Google and Intel. The coalition called on the FCC to create definitive rules for extending an auction that would allow high bidders to meet the reserve price set for the auction. In a section of spectrum called the C Block, the FCC has set rules that would require that the winner of the 22MHz of spectrum allow any wireless devices to connect to the network, meaning wireless telephone customers could bring their handset devices from other carriers. The FCC, in so-called open-access rules, also prohibited the winning bidder on the 22MHz block of spectrum from blocking or slowing wireless and Web content from competitors. But if the reserve price isn't met, the FCC would re-auction the spectrum, presumably with the open-access rules removed. "If the 700MHz auction were cancelled for failing to reach the reserve price, it would not result in a re-auction, but effectively in a different auction altogether," the coalition said. Frontline, in its Friday brief, also called on the FCC to limit the amount of commercial mobile spectrum in each market to 70MHz. If the winning bidder has more than 70MHz, it should be disqualified from bidding on more spectrum, Frontline said. "Significant additional accumulation of spectrum by the largest wireless carriers in this auction, coupled with current market concentration, could cripple the ability of competitors to develop new services and cause serious competitive harm in the wireless market," Frontline said. Representatives of Verizon Wireless and AT&T didn't immediately respond to a request for comments on Frontline's filing.
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Bidding hit $6.1 billion in the federal governmentâs auction of wireless spectrum. Two bidders appear to be bidding for the most valuable national license.
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(InfoWorld) - 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 United States. 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 United States 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 $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 United States, 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: Cyren Call: One of the earliest proposals seeking changes to the congressional plan for the spectrum came from startup Cyren Call Communications, 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, 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: 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 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: 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 United States. This would allow the United States 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: 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 700MHz 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." Google: Finally, Google 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. These dynamic auctions would create a more competitive broadband and wireless marketplace, allowing customers to escape long service contracts, said Richard Whitt, Google's telecom and media counsel. "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."
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You buy a cell phone, load any software you want on it, then choose your carrier. This vision of expanded consumer choices in the wireless world might be a little closer today than it has ever been, especially with reports that the chair of the Federal Communications Commission (FCC) is circulating an &quot;open platform&quot; proposal for the upcoming auction of the 700-MHz band.
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A handful of people who bid in the disastrous C-Block PCS auction in 1996 plan to participate in the upcoming 700MHz contest despite warning signs indicating the potential for similar troubles.Like the earlier auction, the 700MHz auction is set to occur in a faltering economy, presenting challenges to license hopefuls needing cash. Yet, just like that ill-fated auction more than 10 years ago, an oddball collection of participants plan to bid, this time including the Missouri Farmers&#39; Union, the Roman Catholic Diocese of Brooklyn, and Disney.The C-Block PCS auction was infamous because it was designed not just for companies with access to billions of dollars but for entrepreneurs interested in getting into the wireless industry. Postal carriers, lawyers, and doctors quit their day jobs and invested their savings, confident that U.S. Federal Communications Commission (FCC) incentives would help them make it big.But the auction turned into a debacle. Of the original 255 bidders, 89 emerged with licenses, and only a handful of them actually started businesses. The rest went bankrupt, sold their licenses for pennies on the dollar, or returned them to the FCC in an amnesty program.Take Vince McBride, an approved bidder for the upcoming 700MHz auction who lives in San Diego and has won and lost in several auctions. &quot;There are ups and downs, but I keep trying,&quot; he said.McBride was a postal carrier who sunk his life savings into the PCS auction in 1996. A series of lawsuits delayed the auction and then the award of licenses. During that time, Wall Street soured on the wireless market and license winners, who bid prices sky high based on attractive payment terms set by the FCC, struggled to finance their wins. McBride got lucky and returned his licenses to the FCC for little loss.Then the FCC reauctioned licenses and McBride won a new one, which he managed to sell for a nice profit. But in a subsequent reauction, he won another license that was later repossessed by the FCC, which was forced to give it back to the original winner after a series of lawsuits.McBride&#39;s sometime partner Scott Reiter, an emergency room physician who splits his time between Santa Monica and the Philippines, has had a similar series of wins and losses in FCC auctions. He too plans to bid in the upcoming auction. Reiter won a few licenses back in 1996 and shortly after got a few good offers from operators interested in buying them.&quot;I got greedy, basically,&quot; he said. He held out for better offers, which didn&#39;t come, and eventually had to sell his licenses at a loss.Reiter was undeterred, though. He entered the 2002 auctions for 700MHz licenses --&#160;back before there was a solid deadline for when TV broadcasters had to vacate the spectrum. He bought licenses in three markets, later selling the spectrum for a nice profit to AT&amp;T.&quot;When I bought that spectrum, it went up in value like crazy,&quot; Reiter said. McBride also won 700MHz licenses then, later selling them to AT&amp;T. They both agreed with AT&amp;T not to disclose the purchase price.Bidders are currently in a quiet period during which the FCC forbids them to discuss their plans for the upcoming auction. But some of them say that because this time around there is a fixed date for when the spectrum will be available to buyers -- 2009, after the TV broadcasters must vacate it -- the value is easier to gauge than in the previous 700MHz auction. However, it may be difficult for some bidders to get credit these days, which could help keep prices down, they say.While many of the individual bidders insist they intend to build networks if they win the spectrum, many likely have other plans. &quot;I think many of them want to buy and resell it,&quot; said Nadine Manjaro, a senior analyst with ABI Research. A look at the result of the earlier 700MHz auctions, which distributed what&#39;s thought to be less valuable portions of the band, could be spurring big dreams for bidders.Aloha Partners, one of the biggest winners in those auctions, sold its licenses to AT&amp;T for $2.5 billion late last year. Aloha spent over $40 million at the auctions but also later bought licenses from other companies for undisclosed amounts. It is thought to have made a handsome profit.While much attention has been focused on the billions that big companies like Google had to put up to enter the 700MHz auction, some of the licenses could go for quite cheap, which could be attracting some of the individuals hoping to turn around and sell the licenses for a profit. Some licenses in small markets require as little as $10,000 in an up-front payment, Manjaro said.Still, for bidders with bigger aspirations, the sinking economy will likely harm their efforts, unless they already have secured funding.&#160;The recent collapse of Frontline Wireless, a company created by luminaries in the wireless industry to win 700MHz licenses, has raised concern among other bidders. &quot;They had a really strong team of players, and for them to not be able to secure the money shows the impact of the economy,&quot; Manjaro said.One difference in the rules for this 700MHz auction compared to previous contests that could affect individuals who participate is that bidders will be anonymous. That could cut back on potential collusion, a problem that many have said plagued previous auctions.Another auction change, however, likely works against the smaller players. This time, license winners have just four years to build out a portion of their networks. That&#39;s a relatively short amount of time for smaller winners to raise money and build a network.A number of other license winners from the C-Block PCS auction are also approved to bid in the upcoming auction. Bill McKell, CEO for Horizon Chillicothe Telecom, an Ohio telecommunications provider, is on the list. His company was one of the first winners from the C-Block PCS auction to launch a network, but it later&#160;returned the licenses to the FCC.These previous bidders seem prepared to go ahead with this auction despite warning signs that the market might not work in their favor, just like in the PCS auction from 1996. FCC Chairman Kevin Martin recently acknowledged that poor economic conditions could impact the auction because bidders might struggle to raise capital.But these smaller bidders must be gamblers. &quot;Sometimes you get lucky,&quot; McBride said.
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(InfoWorld) - Wireless carriers planning to offer next-generation wireless services have bid $13.9 billion in a spectrum license auction that ended Monday, the U.S. Federal Communications Commission (FCC) said. The FCC sold 1,087 of 1,122 available licenses to 104 companies in its first auction of so-called advanced wireless service spectrum, often called third-generation or 3G wireless. The licenses can be used to offer several services, including voice, data and video, the FCC said. The bidders with the fiveÂ highest winning bidsÂ were T-Mobile License, Verizon Wireless, SpectrumCo, MetroPCS, and Cingular, the FCC said. The unsold licenses remain held by the FCC and will be made available again in a future auction. FCC Chairman Kevin Martin, in a statement, called the auction "the biggest most, successful auction" in FCC history. It was the largest auction of wireless broadband in a single FCC auction, Martin said. "Although we cannot envision our lives without access to the Internet, I believe we are only beginning to imagine the way mobile broadband networks will impact our lives -- changing the business and entertainment possibilities available to consumers," Martin added. The auction made available "raw material" needed for next-generation wireless broadband, said Jeff Kagan, an independent telecom analyst. "The remaining question is, what will these companies do with this spectrum?" he said in an e-mail. "What new services or new competitors will we see using this spectrum? We will have to stay tuned to see what hatches from this auction."
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The Federal Communications Commission said its wireless spectrum auction ended money, netting the U.S. Government a record $13.9 billion. T-Mobile led all bidders with $4.2 billion bid across 120 licenses.