Going Once, Going Twice . . .

The FCC proposes rules for the spectrum auction.

THE FEDERAL Communications Commission is readying an auction of prime real estate -- in the radio spectrum, that is. The 700 MHz band being auctioned off is ideal for broadband services, and the proceeding is likely to be the last big spectrum auction in the telecommunications industry for a long time. The auction could have major implications for businesses, consumers and even victims of crises nationwide. As a result, companies and consumer groups have been lobbying the FCC about conditions to be placed on the spectrum's use -- which will be decided in the next few weeks -- with all parties claiming to promote the public interest.

The most heated debate is over whether the telecom industry is competitive enough and which auction conditions might increase competition. In the mobile services market, some Goliaths have been consolidating, but even so, new sales packages are developing. Greater competitiveness concerns arise with Internet service providers (who are often also mobile service providers), since most consumers have few choices. Even some consumers in Silicon Valley effectively have only one option for high-speed Internet. Rural residents sometimes have no options at all for high-speed Internet.

The FCC's current proposal would theoretically improve access to Internet services. It has relatively stringent build-out requirements -- a minimum threshold for how many people or how much geographic area can receive a network signal -- meant to alleviate some of the rural-urban digital divide. In practice, though, build-out requirements are difficult to enforce.

The FCC is considering "open access" conditions that would be likely to help consumers. These conditions essentially would prevent companies from bundling services, devices and applications. Right now, for example, consumers can use iPhones with only AT&T wireless services. Under proposed FCC restrictions, the winning bidder on one block of spectrum would have to allow any device or application to be used on its network so long as it didn't harm the network. Some tech companies such as Google argue that these "open access" restrictions don't go far enough. But the further restrictions they're pushing for would reduce the value of the spectrum without any assurance of making the industry more competitive or producing a viable entrant.

The FCC's current draft order also addresses the need for a national public safety communications network, the absence of which was felt during the Sept. 11 and Hurricane Katrina crises. Congress set aside a block of spectrum for this purpose, but an interoperable network has not yet been built. The FCC proposal requires the purchaser of a spectrum block adjacent to the public safety block to "coordinate" with discordant emergency responders nationally, to negotiate such details as constructing a public-private network and sharing the contiguous spectrum blocks but giving public safety priority. The terms of the FCC proposal sound vague and unenforceable and, worse, they allow local public safety groups to opt out, which would defeat the purpose of a nationwide network.

None of the auction conditions on the table would forbid any company from bidding, despite what many lobbyists suggest. Restrictions would just make spectrum less valuable to some potential bidders, thereby bringing down bids (now expected to reach about $15 billion total). The FCC has partially protected itself against revenue losses by setting minimum bids. To maximize revenue and public policy goals, it should keep the conditions on open devices and applications and drop the private-public safety arrangement.