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FCC: Bid Interference Did Not Happen

An investigation has cleared a for-profit adviser of any blame for tripping up U.S. government plans to create a wireless network that could be shared with emergency workers.

The Federal Communications Commission's inspector general said on Friday the evidence did not support concerns that the company advising public-safety groups had scared away bidders from meeting a $1.3 billion price for the airwaves.

"Rather, the many layers of uncertainty and risk, and the growing prospect of high network costs ... were responsible for potential bidders' decisions not to bid," the report by FCC Inspector General Kent Nilsson said.

Lack of bidder interest in the public-safety spectrum was the lone failure in an otherwise successful 700-megahertz auction that raised over $19 billion by the time it ended in March. The FCC is now studying plans to reauction the public-safety airwaves known as the D-block.

FCC Chairman Kevin Martin had asked the inspector general to look specifically into whether any agency rules were violated by a financial arrangement between adviser Cyren Call and an organization called the Public Safety Spectrum Trust, representing police, firefighters and other emergency workers.

The 700MHz signals offered at the auction can go long distances and penetrate thick walls. The airwaves are being returned by television broadcasters as they move to digital signals in early 2009.

Under the FCC plan, the trust was to negotiate an arrangement with the winner of the D-block, giving priority use of the airwaves to first responders in an emergency. The public-private partnership is needed to fund construction of the wireless network because public-safety groups do not have the estimated $6 billion needed to build it.

Public watchdog groups and some lawmakers in Congress have singled out Cyren Call because it had told potential bidders it could seek $50 million annually in lease payments from whichever company won the auction.

Trust officials have said the lease payments were an appropriate way to help fund their operations.

In his report, Nilsson said the lease-payment requests were not the main factor in deterring bidders. He said they "were not made in bad faith, and by themselves had no deleterious effect on the auction."

Nilsson said Cyren Call and public safety officials had met with a key potential bidder in the auction called Frontline Wireless, as well as executives from Verizon Wireless and AT&T.

Verizon Wireless is a joint venture of Verizon Communications (NYSE: VZ) and Vodafone Group (NYSE: VOD).

Nilsson said bidders had a host of other concerns, including the possibility of higher-than-expected network costs and the chance they could face financial penalties after finding themselves unable to reach agreement with first responders.