Advocacy groups cry foul over spectrum auction

Advocacy groups have asked the Federal Communications Commission to investigate claims that an official adviser asked for millions of dollars in fees that might have scared off bidders for the D Block of radio spectrum.

The FCC ended its spectrum auction March 19 without receiving any winning bids for the D Block. That block was to have operated under a sharing arrangement with public safety entities to enable creation of a national public safety broadband network.

The winner of the D Block would have been required to negotiate the sharing arrangement with the FCC-designated public safety group, the Public Safety Spectrum Trust, and its official adviser, Morgan O'Brien, chairman of Cyren Call Communications of McLean, Va.

Since the auction ended, allegations have surfaced that O'Brien, in meetings with prospective bidders for the D Block, might have asked for as much as $500 million in fees over 10 years in connection with the new network. Specifically, the allegations involve discussions O'Brien allegedly held with Frontline Wireless LLC, a start-up company that had stated its intention to bid on the D Block. Frontline closed its doors shortly before the auction began in January.

The fees might have been part of a business plan for a structured $50 million-a-year payment to Cyren Call to run the public safety network, according to one expert observer.

Even so, a group calling itself the Public Interest Spectrum Coalition is asking the FCC to investigate the alleged requests for payments and whether they discouraged bidders. The coalition consists of the Consumer Federation of America, Consumers Union, Media Access Project, Public Knowledge and other groups.

In a March 19 letter, the coalition asked the FCC to investigate what happened in those discussions and whether the talks "may have had the effect of preventing Frontline from attracting needed capital and discouraging other bidders."

The coalition said it is not suggesting any wrongdoing took place. But it said concerns about the fees could have led to investors bailing out.

"The commission must determine whether concerns over the possible financial exposure of the D Block winner and/or the role of Cyren Call as an intermediary played a role in the failure of D Block to attract bidders," the coalition said.

An expert observer, David Aylward, director of the nonprofit ComCare alliance for emergency communications, offered a possible explanation for the fees. In a recent blog, he said Cyren Call and the Public Safety Spectrum Trust might have agreed to allow Cyren Call to run the public safety network to ensure that it met first responders' needs. Built into that agreement were fees that were partially disclosed as part of the public bid document, he said.

The bid document contains "at least one clear reference to the successful bidder paying upfront for access to the safety spectrum," Aylward wrote.

Even so, he said that although the arrangement would provide public safety benefits, it apparently did not make sense for bidders.

"Notwithstanding its brilliance and innovation in inception, and an enormous amount of work in good faith by many parties in a short period of time, this plan didn't even get out of the starting gate," Aylward wrote. "It is a total failure on a business basis."

Harlin McEwen, chairman of the Public Safety Spectrum Trust, declined to comment, saying that auction participants are prohibited from commenting under an FCC order active until April 3. A Cyren Call representative did not respond to a request for comment.

The FCC is weighing what to do next. "I believe the commission remains committed to ensuring that we work to solve public safety's interoperability challenges," FCC Chairman Kevin Martin said in a statement March 19. "Because the reserve price for the D Block was not met in the 700 MHz auction, the FCC is now evaluating its options for this spectrum."