FCC: Get Your Spectrum Paddles Ready

Sunday Aug 19th 2007 by Roy Mark
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The agency's January 700MHz spectrum sale might be most compelling airwave auction in years.

It once all seemed so inevitable, so cut and dried, so business as usual in Washington.

By the end of January, the Federal Communications Commission (FCC) plans to auction off a large swath of spectrum ideal for delivering wireless broadband and other advanced wireless services. Less than a year ago, it was considered a foregone conclusion that those airwaves would be bought by wireless incumbents like AT&T and Verizon.

Then Mr. Google came to Washington, giving voice, money and power to what consumer and public policy advocates had said all along: The country needs a third broadband rival to telephone and cable companies. The best way to ensure that, they said, was to limit incumbent wireless companies' ability or willingness to buy the spectrum.

In a move that startled many, the Federal Communications Commission (FCC) in July agreed, at least to some degree, thereby setting the stage for the most compelling spectrum auction in years that could, just maybe, open a third broadband pipe into American homes.

In the first of a three-part series, Internetnews.com examines the upcoming 700 MHz spectrum auction.

Open networks: FCC scrambles the bidding

It's fairly easy to say in 2007 that it is the unquestioned Deal of the Century. Within the next five months, the FCC will auction off enough spectrum to build a nationwide wireless network to compete against entrenched incumbents like AT&T and Verizon, if Google, Yahoo, Microsoft or some other deep-pocketed company -- or some combination -- has the billions to make it happen.

But the incumbents view the spectrum as bonus airwaves to fatten their pipes for the delivery of advanced services to their customers. The incumbents are also more likely to roll out new services much faster since they already have an infrastructure in place.

The bidding for this prime spectrum begins at $4.6 billion. Just who will bid and for how much is still an open question. The FCC guaranteed that in July when it announced the rules for the auction.

Heeding the pleas of Google, other tech companies and consumer and public advocacy groups, the FCC reserved a portion of the best spectrum for a bidder willing to commit to an open network where consumers can connect any legal device or run any legal application on the network.

"This auction provides an opportunity to have a significant impact on the next phase of wireless broadband innovation. A network that is more open to devices and applications can help foster innovation on the edges of the network," said FCC Chairman Kevin Martin.

"As important, it will give consumers greater freedom to use the wireless devices and applications of their choice when they purchase service from the new network owner."

That didn't please the incumbents, who currently strictly limit what devices and software run on their networks.

"We are disappointed that a significant portion of this valuable spectrum will be encumbered with mandates that could significantly reduce the number of interested bidders," Steve Largent, president and CEO of CTIA, the incumbents' trade association, said of the auction rules. "We remain committed to the principle that wireless consumers and American taxpayers are best served when such a valuable commodity is auctioned in a fair and competitive manner with no strings attached."

The incumbents are studying their options.

The FCC equally disappointed Google when it ignored the search giant's request for further mandates, including a requirement that the winner of the spectrum offer wholesale services. Google went so far as to say it would bid on the spectrum and make a run at the incumbents if the FCC met its conditions.

So, will Google play or not? Richard Whitt, Google's Washington telecom and media counsel, now says Google never said it wouldn't participate in the auction if its conditions weren't met, only that it would if the FCC met its preferred terms.

Next page: The FCC's grand open-access experiment.

What's for sale? The FCC's grand experiment

The FCC's open access portion of the auction is an experiment never anticipated by Congress.

In late 2005, Congress voted to set a hard deadline of Feb. 17, 2009, for television broadcasters to vacate their analog spectrum as part of the digital television (DTV) transition. Congress ordered the FCC to auction the vacated spectrum -- UHF television channels 52-69 – by the end of January of 2008 to the highest bidder.

The entire block of spectrum is expected to fetch between $15 billion and $20 billion. Part of the auction proceeds will be used for a subsidy program to help the 15 percent of U.S. households without cable buy digital converter boxes. Still other portions of the proceeds will be used for a nationwide first responders network. The rest will go directly to the U.S. Treasury to reduce the federal deficit.

Only one-third of the overall spectrum available is subject to the FCC's open mandate. The rest of the spectrum, divided into various block sizes, will be auctioned to the highest bidder.

"The auction provides a rare chance to promote innovation and consumer choice without disrupting existing networks or business plans," Martin said. "Indeed, the vast majority of spectrum used for wireless services will remain without…restrictions."

Perhaps anticipating a backlash from incumbent carriers, Martin also emphasized the open access mandate is a very narrow one confined to only one spectrum block. According to Martin, network neutrality rules, unbundling obligations and wholesale requirements are not productive and undermine private sector investments.

"I do not support such regulations," he said. "We must continue to encourage the critical investment needed to build the next generation wireless network. [The auction rules order] does not apply these regulations to this block or any other block. The Commission has found the right balance between providing incentives for infrastructure investment and fostering innovation for new services and products."

But the open network mandate, Martin insists, is one rule that is critical.

"I have said it before, but it bears repeating: The upcoming auction presents the single-most important opportunity for us to achieve the goal of a nationwide third broadband pipe," he said.

The only question now is whether someone is willing to step up and challenge the wireless incumbents.

This article was first published on InternetNews.com.

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