FCC Spectrum Bidding Underway

Let the bidding begin!

The long-awaited wireless spectrum auction began today, with the Federal Communications Commission accepting bids for slices of airspace in the coveted 700 MHz band.

Verizon Wireless, Google, AT&T, Cablevision and other heavy hitters representing a cross section of the communications industry will vie for the airwaves that the government is freeing up in advance of next year’s conversion to digital television broadcasting. The auction is expected to generate as much as $15 billion in government revenue, according to Gartner analyst Tole Hart.

“It’s the last major spectrum auction for the foreseeable future, so there’s some scarcity there,” Hart told InternetNews.com.

The FCC is selling the spectrum in five blocks: A and B, both 12 MHz, the 22 MHz C block, D block, linked with public safety networks, and the unpaired 6 MHz E block.

The C block is the most sought after spectrum at the auction, and that is where Google is likely to come up against the major telcos Verizon and AT&T, Hart said.

Hart predicted that Verizon would likely outbid Google for the bulk of the C block spectrum, with AT&T also making a strong push.

Quite simply, Hart said, the C block spectrum plays into the telcos’ “core competency” of improving the data transfer speeds of their networks, and they will likely be more willing to drop a greater share of their budgets on the auction. Hart said he expects that Verizon to be the top bidder for the C block because that spectrum would be pivotal in executing the company’s Long-Term Evolution (LTE) plans for upgrading its network.

The analyst firm Stifel, Nicolaus & Co. concurs, pegging Verizon as the likely high bidder for C block.

After the first round of bidding today, the FCC saw one bid for the C block as a package; the other bids for regional licenses. Under the auction rules, the identities of the bidders are kept anonymous, so the public can only see the dollar amounts of each bid. The C block package drew a bid of slightly more than $1 billion.

Small and midsized companies engaged in the most vigorous bidding, grappling mainly for licenses in the A and B blocks. The B block licenses in Los Angeles, New York/Newark and Phoenix each drew seven bids.

One group put in a bid for the national D block public-safety/commercial license, though Stifel noted that it is too early to determine whether that is a serious bid or if the group made the move simply to retain eligibility for other parts of the auction.

Analysts have been speculating on which groups would bid on the D block since Frontline dropped out of the auction earlier this month. With Verizon likely winning the C block, Stifel suggests that AT&T might make a run at the D block, which could trigger Verizon to enter a bid just to drive up the price.

There are 214 qualified bidders in the spectrum auction.

After months of speculation, Google officially announced that it would participate in November.

The FCC finalized the auction rules in July, pledging that it would devote nearly one-third of the spectrum to open-access networks, meaning that consumers could use any type of device or software.

The FCC has said that it sees the spectrum auction as a healthy means of promoting competition in the wireless market. The FCC’s nod to open access drew sharp protests from Verizon Wireless and other telcos, which have unsuccessfully challenged the legality of the rules.

Though it remains unlikely that Google will win the C block, if it bids heavily enough, the auction could cross the threshold so the spectrum becomes open access.

The auction is expected to last for several weeks.

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