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FCC Mulls Slashing Spectrum Auction Minimums

WASHINGTON -- The Federal Communications Commission on Thursday proposed halving the minimum opening bid on a piece of valuable wireless spectrum, but several commissioners expressed doubt that the plan would work, after an earlier auction failed to attract industry interest.

The five-member FCC approved a draft proposal, devised by the agency's chairman, Kevin Martin, cutting to $750 million a prior $1.3 billion minimum bid and easing other requirements. The proposal is subject to public comment.

The aim is to lure commercial interest in the airwaves, which come with a requirement to partner with public safety agencies during emergencies. The airwaves are being vacated as television broadcasters move to digital signals early next year.

The FCC wants to auction them off, and at the same time address a lack of "interoperability" between systems used by first responders that hindered emergency responses during such crises as the Sept. 11 attacks and Hurricane Katrina.

But several commissioners raised doubts that the changes would entice commercial partners to buy the spectrum, for reasons including too-high prices and lack of clarity for public safety officials.

"We are flying blind to some extent," said Jonathan Adelstein, a Democratic commissioner who concurred in part and dissented in part on the changes. "We're expecting major investments are going to be made by private enterprise" without a cost-benefit analysis to make it economically viable.

Of the new $750 million price tag, Adelstein said: "I cannot put my vote behind such a high figure arrived at so arbitrarily."

The other Democratic commissioner, Michael Copps, said the proposal is unclear as to what public safety officials get for the $48.50 fee they would pay to commercial providers for use of the spectrum.

Republican commissioner Robert McDowell was also skeptical, but voted to push the proposal through to prevent "analysis paralysis."

Roadblocks

Investors were unwilling to meet the government's original minimum price for the D block spectrum, considered valuable because its signals go long distances and penetrate thick walls.

The government auctioned off nearly $20 billion worth of 700MHz spectrum earlier this year, with Verizon Communications (NYSE: VZ) and AT&T (NYSE: T) the biggest winners.

The companies have complained about several aspects of the FCC's approach. Verizon and AT&T both want the spectrum to be sold in pieces from the start and Verizon has suggested public safety partners choose their commercial partners.

The current proposal favors a national bidder, which Martin said would ensure the greatest coverage area.

Leading Democrats in Congress and a leading public safety group back the national approach. Local officials, including those in New York City, have suggested that cities be given the spectrum directly and want more control dealing with whichever commercial group emerges as the licensee.

Martin said if a consensus of commissioners agreed on lowering the minimum bid, he might be open to the idea. Martin wants the commission to vote on a final rule by year end.

Several commissioners cited the nation's financial turmoil as the basis for their skepticism over whether the proposal would attract bidders.

But Martin said the need for airwaves for public safety officials is still urgent, no matter what is going on with the economy, citing natural disasters and the overhang of a potential terrorist attack.

"We can't afford to continue to just wait forever ... It's been seven years since 9/11," Martin said. "I think it's important to make this valuable piece of spectrum available to the marketplace in a timely manner."

The FCC is seeking public comment as part of its rulemaking process. A final vote by commissioners is needed to approve the rule.



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