IG clears spectrum adviser of allegations

An official adviser's request for millions of dollars in lease payments for a national public safety broadband network probably was not enough to deter prospective bidders, according to a new report from the inspector general of the Federal Communications Commission.

The FCC authorized creation of a public safety network through the dedication of the D Block of radio spectrum up for bid in the auction that ended March 19. The winner of the D Block was to have negotiated to share the spectrum with public safety agencies during major emergencies. However, only a single bid for the D Block was received, and it fell far short of the minimum required bid.

After the auction, several consumer groups asked for an investigation into alleged actions by Morgan O'Brien, chairman of Cyren Call Communications and an adviser to the Public Safety Spectrum Trust. The FCC had designated the organization as the official representative for public safety agencies.

The consumer groups said O'Brien might have discouraged prospective bidder Frontline Wireless LLC by proposing that the D Block winner pay as much as $500 million over 10 years in exchange for access to the public safety spectrum.

FCC IG Kent Nilsson found that O'Brien discussed a possible $50 million-a-year lease payment from the D Block winner, though the amount could have been less. But Nilsson concluded that the lease payment alone was not enough to discourage bidders. Furthermore, those discussions do not appear to have violated any FCC rules, he said.

"This investigation has concluded that the lease payment estimates conveyed to Frontline on Nov. 29, 2007, were informational in nature, were not made in bad faith and by themselves had no deleterious effect on the auction," Nilsson wrote. "The lease payment was only a drop in one of the many buckets that concerned Frontline and other potential bidders interviewed. As a consequence, we conclude that the lease payment was not, per se, the cause of the D Block's failure to attract a bid at the reserve price."

Several factors, including the prospect of high network costs and "layers of uncertainty and risk," were likely responsible for the failure to attract a winning bid, Nilsson concluded.

Harlin McEwen, chairman of the Public Safety Spectrum Trust, said he is pleased with the IG's findings and is committed to working on a new auction to create a nationwide wireless broadband network for public safety.

O'Brien responded to the report in a news release by saying, "Today closes the book on Auction 73. The release of the inspector general's report is an encouraging sign that the FCC is moving forward to re-auction the D Block."