Do 700 MHz rules matter?
The 700 MHz auction rules process is going to be a messy affair given the fact that everyone wants a piece of it and that the Federal Communications Commission's members can't seem to agree on anything of substance.
The auction will be the most valuable spectrum auction we've seen and the most complicated one for the FCC, which is attempting to do Congress' bidding to enable a third broadband pipe to compete with DSL and cable. The commission doesn't have much time. The auction has to start no later than Jan. 28, 2008, and proceeds from the sale need to be deposited with the U.S. Treasury no later than June 30, 2008. Auction winners can't launch service until analog TV service is shut down on Feb. 17, 2009.
After postponing the open meeting on auction by more than nine hours last week (apparently because commission members were bickering behind the scenes), the FCC made no formal rulings on auction rules, except to allow a mix of small, medium and large licenses, but did ask for public comments on some of the more controversial proposals. The commission finds itself trying to balance competition that could come from non-traditional wireless companies such as Google, Skype and DirecTV, public-safety interests and the desires for incumbent operators that want to keep the status quo when it comes to auction rules.
Non-traditional players like Google want rules that both facilitate license aggregation on a national basis and prevent a company from blocking nationwide entry simply by acquiring one regional license. A Google-led group, known as Coalition for 4G in America, wants the FCC to make available at least one 11-megahertz paired block; offer at least some large geographic areas; and enable package bidding so that rights to a national service could be acquired--principles the group believes will enable a third broadband provider.
Meanwhile, the FCC is also grappling with creating a license that will stipulate a public-safety interoperable broadband network that provides wholesale commercial services to combat the inability for public-safety officials to talk to each other during major disasters.
Of course the mobile industry wants to keep the status quo, pointing out the fact that AWS auction did bring in new entrants and yielded a record amount of money for the U.S. Treasury.
But will the 700 MHz band really produce an effective third broadband competitor? Despite the excellent propagation characteristics of this band, constructing a wireless network from scratch is an expensive proposition, especially with the expectation that the licenses are going to fetch some nice money for the U.S. Treasury. News Corp. has already cited the difficulty and expense of building out a wireless broadband network. For companies whose core business isn't operating wireless networks, it's a project that is difficult to justify.
Analysts have also questioned whether the lower band of the 700 MHz spectrum can even support two-way communications. This could drive up prices further for the upper bands.
Even if the FCC offers up rules that take into account all players vying for a stake in the 700 MHz band, we could still end up seeing the status quo. Price is always the name of the auction game. -Lynnette