Economy could hurt 700 MHz auction

Will the 700 MHz auction be as big of a windfall for the federal government as what continues to be touted? Dubbed as the last of the beach-front property when it comes to spectrum availability in the United States, the 700 MHz spectrum is supposed to fetch some $20 billion for the U.S. Treasury.

But now the auction is coming at a time when a meltdown of the U.S. housing and subprime mortgage markets is hurting the ability of companies to raise money. "Is this ideal time to be conducting an auction? I'm not so sure but Congress has required us to go forward with that auction," FCC Chairman Kevin Martin said during a press conference yesterday.

Frontline appears to be the first casualty of the credit crunch as many assume the company, which was likely the only company that planned to bid in the D-block auction to build a public-safety network, was hit by the soft market as it wasn't able to raise sufficient funds to bid on spectrum.

In turn, you have to wonder how aggressive other non-traditional wireless companies such as Google, Chevron or Cox (see story No. 3) are willing to be in such an environment. I've argued in the past why Google won't be a winner at all costs. Building a wireless network is a capital-intensive endeavor--especially for a company whose core business is not wireless. Moreover, the wireless industry is fiercely competitive. Add a struggling economy to the mix, and things don't bode well for players outside of the industry or even smaller operators for that matter.

Non-traditional companies played a big hand in changing FCC auction regulations--namely a public-safety network and open access provisions--but will they manage to bring those changes to fruition? And will the treasury get its $20 billion?--Lynnette