FCC: Get Your Spectrum Paddles Ready

It once all seemed so inevitable, so cut and
dried, so business as usual in Washington.

By the end of January, the Federal Communications Commission (FCC) plans
to auction off a large swath of spectrum ideal for delivering wireless
broadband and other advanced wireless services. Less than a year ago, it
was considered a foregone conclusion that those airwaves would be bought
by wireless incumbents like AT&T and Verizon.

Then Mr. Google came to Washington, giving voice, money and power to
what consumer and public policy advocates had said all along: The
country needs a third broadband rival to telephone and cable
companies. The best way to ensure that, they said, was to limit
incumbent wireless companies’ ability or willingness to buy the spectrum.

In a move that startled many, the Federal Communications Commission
(FCC) in July agreed, at least to some degree, thereby setting the stage for the
most compelling spectrum auction in years that could, just maybe, open a
third broadband pipe into American homes.

In the first of a three-part series, Internetnews.com examines
the upcoming 700 MHz spectrum auction.

Open networks: FCC scrambles the bidding

It’s fairly easy to say in 2007 that it is the unquestioned Deal of the
Century. Within the next five months, the FCC will auction off enough
spectrum to build a nationwide wireless network to compete against
entrenched incumbents like AT&T and Verizon, if Google, Yahoo, Microsoft
or some other deep-pocketed company — or some combination — has the
billions to make it happen.

But the incumbents view the spectrum as bonus airwaves to
fatten their pipes for the delivery of advanced services to their
customers. The incumbents are also more likely to roll out new services
much faster since they already have an infrastructure in place.

The bidding for this prime spectrum begins at $4.6 billion. Just who
will bid and for how much is still an open question. The FCC guaranteed
that in July when it announced the rules for the

Heeding the pleas of Google, other tech companies and consumer and
public advocacy groups, the FCC reserved a portion of the best spectrum
for a bidder willing to commit to an open network where consumers can
connect any legal device or run any legal application on the network.

“This auction provides an opportunity to have a significant impact on
the next phase of wireless broadband innovation. A network that is more
open to devices and applications can help foster innovation on the edges
of the network,” said FCC Chairman Kevin Martin.

“As important, it will
give consumers greater freedom to use the wireless devices and
applications of their choice when they purchase service from the new
network owner.”

That didn’t please the incumbents, who currently strictly limit what
devices and software run on their networks.

“We are disappointed that a significant portion of this valuable
spectrum will be encumbered with mandates that could significantly
reduce the number of interested bidders,” Steve Largent, president and
CEO of CTIA, the incumbents’ trade association, said of the auction
rules. “We remain committed to the principle that wireless consumers and
American taxpayers are best served when such a valuable commodity is
auctioned in a fair and competitive manner with no strings attached.”

The incumbents are studying their options.

The FCC equally disappointed Google when it ignored the search giant’s
request for further mandates, including a requirement that the winner of
the spectrum offer wholesale services. Google went so far as to say it
would bid on the spectrum and make a run at the incumbents if the FCC
met its conditions.

So, will Google play or not? Richard Whitt, Google’s Washington telecom
and media counsel, now says Google never said it wouldn’t
participate in the auction if its conditions weren’t met, only that it
would if the FCC met its preferred terms.

Next page: The FCC’s grand open-access experiment.

Page 2 of 2

What’s for sale? The FCC’s grand experiment

The FCC’s open access portion of the auction is an experiment never
anticipated by Congress.

In late 2005, Congress voted to set a hard deadline of Feb. 17, 2009,
for television broadcasters to vacate their analog spectrum as part of
the digital television (DTV) transition. Congress ordered the FCC to
auction the vacated spectrum — UHF television channels 52-69 – by the
end of January of 2008 to the highest bidder.

The entire block of spectrum is expected to fetch between $15 billion and $20
billion. Part of the auction proceeds will be used for a subsidy program
to help the 15 percent of U.S. households without cable buy digital
converter boxes. Still other portions of the proceeds will be used for a
nationwide first responders network. The rest will go directly to the
U.S. Treasury to reduce the federal deficit.

Only one-third of the overall spectrum available is subject to the FCC’s
open mandate. The rest of the spectrum, divided into various block
sizes, will be auctioned to the highest bidder.

“The auction provides a rare chance to promote innovation and consumer
choice without disrupting existing networks or business plans,” Martin
said. “Indeed, the vast majority of spectrum used for wireless services
will remain without…restrictions.”

Perhaps anticipating a backlash from incumbent carriers, Martin also
emphasized the open access mandate is a very narrow one confined to only
one spectrum block. According to Martin, network neutrality rules,
unbundling obligations and wholesale requirements are not productive and
undermine private sector investments.

“I do not support such regulations,” he said. “We must continue to
encourage the critical investment needed to build the next generation
wireless network. [The auction rules order] does not apply these
regulations to this block or any other block. The Commission has found
the right balance between providing incentives for infrastructure
investment and fostering innovation for new services and products.”

But the open network mandate, Martin insists, is one rule that is

“I have said it before, but it bears repeating: The upcoming auction
presents the single-most important opportunity for us to achieve the
goal of a nationwide third broadband pipe,” he said.

The only question now is whether someone is willing to step up and
challenge the wireless incumbents.

In part 2 of this series, internetnews.com will explore the FCC’s interest in a public-private alliance for public safety.

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