FCC's Airwaves Auction Draws $2.78 Billion in Bids

By Molly Peterson
Bloomberg News
Friday, January 25, 2008

The Federal Communications Commission took second-round bids totaling $2.78 billion in an auction of airwaves that would let carriers offer faster Internet access on cellphones.

The value of bids rose 15 percent from a previous round, the FCC said on its Web site, without revealing which companies made offers. The largest slice of spectrum, known as the C-block, drew an offer of $1.24 billion. The government expects the auction, which may last more than a month, to draw winning bids of $10 billion to $15 billion.

AT&T, Verizon Wireless and Google are among 214 companies vying for 1,099 spectrum pieces that will become available when television broadcasters move to digital signals in February 2009. The airwaves are ideal for mobile Internet access because they can travel long distances and easily pass through walls.

If bids for the C-block airwaves reach $4.6 billion, the buyer must open its network to any legal mobile device or program, though it could take until the middle of next week for bids to reach that amount, Blair Levin, an analyst with Stifel, Nicolaus, wrote in a note.

The FCC will hold three bidding rounds per day and will announce the winning bids after the auction ends. It will announce the highest bids after each round, though not the names of the companies that made them.

AT&T and Verizon Wireless, the two largest U.S. cellphone providers, are likely to be the auction's biggest winners, spending as much as $5 billion each, said analysts including Credit Suisse's Christopher Larsen.

Google, which lobbied the FCC to adopt the so-called open-access rules for the C-block, probably will bid at least $4.6 billion to ensure that they take effect, Larsen said in a note this week. Opening the C-block to more devices would help Google sell more advertising on phones by expanding consumers' access to mobile Web content.

Google, owner of the most popular Internet search engine, may then let AT&T or Verizon top its offer because it may not want to actually win the airwaves and build a nationwide wireless network, Larsen said.

One bidder offered $472 million for a separate slice of airwaves, known as the D-block, whose buyer would be required to build a nationwide network that public-safety agencies would share with commercial carriers.

Frontline Wireless, a Silicon Valley-backed company that wanted to buy the public-safety airwaves and build the network, closed this month. FCC Chairman Kevin J. Martin said this month that he's still optimistic that the auction will create a national high-speed wireless network to improve emergency communications during disasters such as terrorist attacks and hurricanes.

If bids for the D-block license do not reach $1.3 billion by the end of the auction, the FCC may modify the public-safety conditions and put them up for sale again.

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