Tuesday, December 4, 2007
Inside the 700 MHz spectrum
Yesterday was the deadline for potential bidders in the upcoming 700MHz auction to file with the Federal Communications Commission. Unfortunately, we won't find out exactly who’s bidding on what until the FCC publishes information related to the auction later this month, but there are already some big players reportedly readying their wallets.
Google, Cox Communications, Frontline Wireless, and AT&T all appear to have submitted an application for a chance to bid on the spectrum. On the other hand, Sprint, Time Warner Cable and Comcast have all declared their total disinterest in the upcoming 700MHz auction.
The auction begins on January 24 and could last several weeks as long as bidders keep bidding. It will be conducted electronically with numerous rounds per day, with shorter timeframes between rounds as the bidding activity heats up. The current reserve price for the entire 700 MHz spectrum is set at $10 billion, but many observers expect the auction to bring in much more.
Google on Friday announced it plans to bid on the spectrum, often called "beach front" property because it can carry wireless broadband signals three to four times farther than some other spectrum bands. An AT&T spokesman on Monday confirmed the company's earlier statements saying it intends to bid.
A Verizon Wireless spokeswoman declined to comment on the company's bidding plans. Verizon in September had filed a lawsuit against the FCC for its so-called open-access requirements on about a third of the 62MHz of spectrum to be auctioned starting in late January. But last week the company announced it would open up its existing network to outside wireless devices and applications starting in 2008. So Verizon's objections to the FCC's similar open-access rules seem to have subsided.
Sprint Nextel does not plan to participate, a spokesman said. "Sprint has all the spectrum it needs to meet its strategic business needs," spokesman Scott Sloat said.
Startup Frontline Wireless, made up of wireless industry and government veterans, has also indicated it plans to bid in the auctions. There could be dozens of other bidders, including regional wireless carriers and broadband providers.
What Happens Now?
The FCC plans to make the names of the auction applicants public by Dec. 28. For one of the first times, the FCC is conducting an anonymous bidding process, so it will not disclose what sections of spectrum applicants intend to bid on.
The auctions begin on Jan. 24, but they could last several weeks. Auctions go on as long as bidders keep bidding; the FCC's last major auctions, its advanced wireless services auctions in 2006, lasted about five weeks. If reserve prices aren't met on parts of spectrum, the FCC will re-auction those bands.
The auction is conducted electronically with numerous rounds per day, with time frames for rounds growing shorter as bidding activity heats up.
Why Is This Auction Important?
The 700MHz auctions represent the last large chunk of spectrum available for the FCC to auction in the foreseeable future. In addition, the spectrum, now used to carry over-the-air television signals, can be used to carry long-range wireless broadband traffic. Many people, including FCC Chairman Kevin Martin have said the auction represents a golden opportunity to create a nationwide broadband network in competition with the providers of cable modem and DSL (Digital Subscriber Line) and fiber-based services.
Some consumer groups have called the auctions the "last, best hope" for a third pipe that competes with cable operators such as Comcast and DSL and fiber-based providers such as AT&T and Verizon Communications.
While many observers see the spectrum as optimal for wireless broadband, some carriers may use it for traditional wireless voice traffic as well. Some plans for the spectrum will likely include networks that merge traditional wireless voice with high-speed data services. Google seemed to be headed in that direction when it launched an open-development handset coalition in early November.
In addition, about 20MHz of spectrum will go toward a nationwide voice and data network for public safety agencies, including police and fire departments. The U.S. Congress set aside about half of that spectrum for a public safety umbrella group, and the other half will be auctioned, with the winning bidder required to build a nationwide network that serves commercial and public-safety needs.
Several lawmakers and public-safety officials pushed hard for the spectrum after communication problems during the Sept. 11, 2001, terrorist attacks on the U.S. and later disasters. Public-safety agencies, using a wide variety of devices on different bands of spectrum, weren't able to communicate with each other.
The FCC didn't require that bidders build certain types of networks, except that a voice and data network is envisioned for the public-safety network. And customers taking advantage of the open-access rules on about a third of the spectrum are likely to connect a variety of devices to the network. Beyond that, the FCC has required geographic or population-based build-out requirements on much of the spectrum.
What's Being Auctioned?
For sale is 62MHz of spectrum in the 700MHz band. In late 2005, after a decade of debate, Congress passed a law requiring U.S. TV stations to move to all-digital broadcasts and abandon analog spectrum between channels 52 and 69. The deadline for TV stations to end broadcasts in the 700MHz band is February 2009.
The spectrum is broken up into five blocks. The C block, a 22MHz of spectrum that has the open-access rules, is broken up into 12 regional licenses across the U.S. A bidder can win one or more of those regional licenses.
The A block is 12MHz, broken up into 176 smaller regions called economic areas, as is the 6MHz E block. The 12MHz B block is broken up into 734 local areas called cellular market areas. Again, bidders can win multiple regional or local licenses.
Finally, 10MHz of spectrum in the D block, paired with about 10MHz set aside for public safety, is a nationwide license.
Congress has budgeted the auctions to raise at least $10 billion, but many observers expect them to cost much more. The FCC set the reserve price for the C block of spectrum at $4.6 billion.