FCC: Do I hear $1.3B?

The Federal Communications Commission's auction of the 700-MHz portion of the spectrum, now occupied by TV broadcasters, has been a financial success, with total bids of more than $19.5 billion for all five bands, far outstripping the $10 billion reserve set by the FCC.

But the one loser in the ongoing auction, now entering its second month, has been the D block, which includes the chunks of spectrum set aside for a nationwide public safety network.

"It is now becoming clear that the reserve price will not be met," said Roberta Wiggins, a research fellow at the Yankee Group.

Bidding on that block stalled early in the auction, with one bid at $472 million ? far below the minimum price of $1.3 billion set for it. Bidders apparently have been scared off by what Wiggins called the "horrendous cost" and "Herculean task" of building out a single network, a large part of which would be used exclusively by first responders in state, local and public safety agencies around the country. During emergencies, public safety agencies would receive priority on all segments of the D block network.

What the stalled bidding means for the future of the public safety network is not clear.

"We still don't know what happens if D block doesn't meet its reserve and what they plan to do with it," said Berge Ayvazian, chief strategy officer at Yankee Group.

That is just one of many unknowns discussed in a telebriefing Thursday by Yankee Group analysts who summed up the current status of the auction. The open-ended auction could continue for as long as four more months, and for the first time the bidding is anonymous.

"We not only don't know who the winners are yet, we don't even know who is bidding," Ayvazian said.

TV broadcasters are moving to digital signals within a year, freeing up a large segment of spectrum in the 700-MHz band that now is being used for commercial TV channels. Commercial operators are vying for 1,099 licenses being offered by the FCC for auction in that band. The majority of those licenses will be commercial operations that are expected to open the door for new generations of IP-based mobile broadband services that can accommodate data and full Internet access as well as voice traffic.

Bidding opened in January and the FCC requires payment in June. Current broadcasters will have to vacate the spectrum by February 2009, and first deployments by new license holders probably will be seen around 2010. As of Thursday afternoon, bidding was in the 123rd round, progressing at a rate of six rounds each day. No announcements will be made until the auction ends, when bidding on all blocks of the spectrum have stopped.

"It certainly is not over, even though the activity has slowed down," said Diane Northfield, director of global regulatory research at the Yankee Group. Bid totals are climbing slowly by several million dollars a day, which is slow given the billions of dollars involved.

One are of the spectrum that has gotten a lot of attention is the C block, which is reserved for open-access networks not restricted to devices and services offered by the network operators. Northfield thinks this has been overhyped, because currently, bids by regional networkers have outstripped those by nationwide licensees. If the licenses are awarded on a regional rather than a national basis, "it's a potential dilution of the open access," she said.

But the big loser so far is the D block and the public safety network, which is being offered as a single, nationwide license. One option for the failed block would be offering it for auction again under the same terms, which Wiggins said is unlikely. "Why try again?" she said. Or it could be offered on more liberal terms that would make the opportunity more attractive to commercial operators.

One option that could gain traction would be for the federal and state governments to fund the building of a public safety network for state and local agencies.

"Many believe that the building of the public safety network should not be left to commercial auction," but to public funding, Wiggins said.

That is the choice of at least some at the FCC. "My first preference ? by a long country mile ? would have been a fully funded, federally funded public-safety-grade network reserved solely for first responders," FCC Commissioner Michael Copps has said.

Sources for funding the network could include a diversion of some of the budget for the stalled Interagency Wireless Network, intended to serve primarily federal law enforcement agencies, or the $10 billion that will be raised in the 700-MHz auction above the $10 billion reserve set by the FCC.

William Jackson writes for Government Computer News, an 1105 Government Information Group publication.