FCC Raises Record $19.6 Billion In Auction of Wireless Airwaves
Wednesday, March 19, 2008
The Federal Communications Commission's auction of valuable wireless airwaves ended yesterday after raising a record $19.6 billion and setting the stage for the first nationwide network that would be open to all devices and software.
The FCC would not yet name the winners of airwaves, so it was unknown whether a new company would enter the wireless world to compete against the two biggest carriers, AT&T and Verizon Wireless. Further, the sole bid for a block of spectrum to be used for public-safety workers was far below the minimum price set by the agency.
FCC Chairman Kevin J. Martin said the auction raised more money than all past auctions of radio spectrum combined. But public-interest groups and a key lawmaker immediately asked for reviews into what went wrong with the auction of the D Block, the swath of airwaves set aside for emergency first responders.
The public-safety portion of the airwaves was designed to be developed by a partnership between a corporate entity and police, firefighters and other public safety groups.
Rep. Edward J. Markey (D-Mass.), chairman of the House energy and commerce subcommittee on telecommunications, called for a hearing to look at the requirements for the public safety network and penalties if the winning bidder failed to complete the network. "I believe we must fully review the nature and authority of the public safety spectrum trust and whether this model should be retained or modified," Markey said.
Markey said the hearing would also look at whether the auction provided opportunities for new companies to compete.
Martin said he issued an order yesterday for a commission vote on separating the D Block of spectrum. That would allow the agency to reveal the winners of the other four blocks, which met their minimum price targets. He did not say when a vote would take place but said it would not be on the FCC's agenda at its monthly open meeting today.
Martin said the commission is committed to creating a public safety network. "We will evaluate what we will do on the D Block and how it will move forward," Martin said.
Raising $19.6 billion "is not nearly enough to call this auction a success," said Gigi Sohn, president of consumer advocacy group Public Knowledge. "The chairman needs to act expeditiously to de-link the D Block and open it to a lot of other possibility and take public comment on a re-auction."
Some have said the conditions that the FCC imposed on D Block bidders were too stringent.
"Turns out the D Block was not ready for prime time," said Rebecca Arbogast, an analyst at Stifel Nicolaus. The FCC "will have to take a long hard look at what it needs to do to pull back on some of its requirements and also reduce the amount of uncertainty if you do win it."
Rick Joyce, a telecommunications industry lawyer said that the minimum price for the D Block was too high considering the requirements to complete it, which some estimate could cost $5 billion to $7 billion.
"It is encumbered spectrum, simply put," Joyce said. "And that is wildly understating how complicated this spectrum will be to build out and operate."
One valuable swath of spectrum will be built with open network rules, conditions pushed by Google and public interest groups. But observers say that if the winner of those airwaves is Verizon or AT&T, the two biggest wireless carriers, the auction would fail in its goal to generate more competition in the wireless industry. Arbogast said only a dominant carrier is capable of paying the $1.3 billion price tag for the spectrum and then the costs to complete the nationwide network during the economic credit crunch.
The proceeds of the auction will be deposited in the U.S. Treasury by June 30 and used for education on the transition to digital television.