FCC sends unclear signal to bidders

Despite all the documents and reports, the
Federal Communications Commission's recent
failure to attract a bidder to create a nationwide
broadband network for public safety is
being blamed on too much uncertainty and
too little information.

FCC was bold and innovative but in the end
offered little detail on what the project would
cost, how it should be structured and what
revenues it might generate. The result, industry
observers say, was too many unknowns
that could cause huge financial losses for
bidders.

If FCC moves forward with an anticipated
second attempt to create the public-safety network,
it should provide critical
technical information to prospective
bidders, experts say. The commission also
must provide information on the known costs
and likely revenues related to building and
operating the network.

STILL WORKABLE

Despite the unsuccessful auction, advocates of a
nationwide license for public safety say it is a
groundbreaking idea that FCC should try again.

"Setting up a national license and the idea of
sharing the public-safety network are a radical
departure from the past and a huge step forward
for the FCC," said David Aylward, director
of the ComCare Alliance, a nonprofit umbrella
group for public-safety communications.

However, as a business proposition, "they got
it wrong," he said.

FCC is weighing its options for
public-safety communications
after it failed to attract its
minimum reserve price
for the D Block of radio
spectrum, which was
to be partially dedicated
to a nationwide
wireless
broadband network
for first
responders. The
spectrum auction
closed March 18
after receiving
$19.6 billion in
bids.

The D Block in the
700 MHz band received
a single bid of $472 million,
far short of the $1.3 billion
reserve price. To create the
national network, FCC
had ordered that a 10 MHz
portion of the D Block be shared by public-
safety and commercial users, with fire
and police having priority during
major emergencies. The
winning bidder was to
negotiate the sharing
arrangement with the
Public Safety
Spectrum Trust, a
group designated
by FCC.

The plan had
been promoted by
start-up company
Frontline Wireless
LLC, which abruptly shut down in January.
On March 19, advocacy groups asked FCC to
investigate allegations that an official adviser to
the spectrum trust may have scared off bidders
by stating that the winning bidder would pay as
much as $500 million in fees over 10 years as a
cost of operating the network. The public bidding
documents mention a fee but do not specify
the amount.

If FCC holds another auction, Aylward said,
it should disclose upfront all potential costs
and how much public-safety groups are likely
to pay for the network. The information
would best be developed by a group of
telecommunications providers and
experts based on the bid documents
issued by the public-safety trust.

"There has been no public discussion of
what this network will cost to build,"
Aylward said. "It could be $4 billion to $7
billion."

In addition, he expressed concerns about the
network's legal structure as outlined in the public
bid document. The structure calls for a substantial
role for an entity ? presumably the
public-safety trust's adviser, Morgan O'Brien, of
Cyren Call Communications ? to maintain and
operate the network for a fee, Aylward said. The
network operator would provide services such
as customer care, billing and operations centers.

FCC has been asked to investigate O'Brien's
alleged discussions about the fee with prospective
bidders. Trust officials and O'Brien declined
to comment, citing an FCC order barring discussion
of the auction.

Aylward declined to judge whether the proposed
prominent role of the network operator is
a good arrangement, but he noted that the
structure gives the winning bidder limited legal
control. "If I was a bidder and saw that, I would
walk," he said.

Another observer, John Kneuer, senior vice
president at Rivada Networks, a provider of
wireless network solutions, said bidders did
not have an opportunity to review detailed
technical specifications for the new network
before the auction. As a result, he added,
there was great uncertainty about how much
it would cost to build and operate the
network.

"There was insufficient clarity in the technical
specifications," Kneuer explained. "They
were not offered to the general public."

If the details are made public, it is more
likely that prospective bidders will be able to
negotiate better agreements and allow public
safety to better leverage the commercial networks,
he said.

It might be better for more than one carrier
to fulfill the first responders' broadband
needs, he added.

"The danger of the D Block is that you are
locking public safety into one preferred network
provider," Kneuer said.

Charles Werner, fire chief of Charlottesville,
Va., and a member of a Homeland Security
Department advisory committee on firstresponder
communications interoperability,
said the high reserve price and a possible 10
percent penalty might have doomed the
auction.

The penalty was to be imposed on the D
Block winning bidder if no agreement could
be reached with the public-safety trust. If the
spectrum cost $1.3 billion, the penalty would
have been $130 million.

"It's too risky and too unknown," Werner
said. "Who in their right mind would take that
offer?"

If those requirements are removed, another
auction would likely be a success, he added.

THE HILL IS WATCHING

Rep. Ed Markey (D-Mass.), chairman of the
Energy and Commerce Committee's
Telecommunications and Internet
Subcommittee, said he is ready to review
the public-safety trust and its business
model, along with other terms.

Policy-makers should analyze whether
there is a need for a high reserve price,
Markey said in a news release.

He also said the subcommittee must
review "the nature and authority of the
public-safety spectrum trust and whether this
model should be retained or modified, the
length of the license term, the build-out
requirements and schedule of benchmarks for
such build-out, the opportunities for ensuring
further openness in wireless markets, the
penalties associated with failure to fulfill
license conditions, and other issues."

The subcommittee will hold a hearing on
those issues.

Werner said he is optimistic about the
finances of the new network. Because FCC
made nearly double the expected revenue in the
spectrum auction, almost $20 billion, it should
offer some financial incentives to build and
operate the first responder network, he said.

"People are looking at the negatives,"
Werner added. "But I believe this can work."

Alice Lipowicz (alipowicz@1105govinfo.com) is a
staff writer at Washington Technology.