Technology

The FCC's 'Transformative' Auction


FCC chief Kevin Martin talks to BusinessWeek.com about the wireless auction and its potential impact on the industry

Kevin Martin, chairman of the Federal Communications Commission, has pulled off a major policy coup, using an auction of new wireless spectrum to pry open the nation's cellular networks to more competing devices and services.

For the past year, Martin has been an active proponent of the push, persuading his fellow commissioners to impose auction rules requiring winners of the largest block of spectrum to allow open access on the resulting networks. Now, Martin says these conditions have already begun transforming the industry. While buyers of the C block licenses will be required by the FCC to provide open access to all devices, Martin expects other U.S. wireless industry players to soon follow suit voluntarily, much as Verizon Wireless decided to do late last year.

With the bidding nearly over and totaling a record $19.4 billion, Martin spoke with BusinessWeek.com's Olga Kharif about open access, the auction, and his legacy as the Bush Administration draws to a close.

Would you say the auction is a success?

I think that the auction has already been a significant success. We've seen significant demand from a variety of players. We've adopted rules that require a more open platform to innovations and applications and handsets on a significant portion of the spectrum. And, to top it all off, we've raised significantly more than what was budgeted by the government originally and than what most analysts have predicted—and more than the government has ever raised in any previous auction.

A lot of people argue that the open-access requirements the FCC imposed in the auction are open to interpretation. How do you ensure application of the FCC's interpretation?

We've got certain rules that we've put in place. We said carriers couldn't discriminate among handsets and applications. And so I think the commission will obviously have to stay vigilant in making sure that we enforce these conditions, and the commission has every intention to do that.

How will these open-access requirements affect the wireless industry?

They've already had a transformative effect on the industry as a whole. Just look at things like [Google's (GOOG)] open Android software platform for cell phones that T-Mobile supported; Verizon's (VZ) announcement of them moving to a more open platform and being open to any applications that they announced in December; and, indeed, AT&T (T) emphasizing the more portable nature of their phones. So the industry is already going in the same direction as required in the auction.

What additional steps must be taken to ensure the industry keeps moving in this direction?

I think consumers will certainly benefit from this open platform. And as they gravitate toward it, it will have a spillover effect onto other platforms trying to become more open. We'll see a competition between this open wireless platform and other platforms, and I think that would drive others to a more flexible platform as well. I don't think it would require [new FCC] rules that would apply to the other carriers.

Looking at the nitty-gritty of the auction, there's a huge discrepancy in prices for various blocks of airwaves. Why?

We did, among all of the different blocks, put in place different kinds of rules, and we auctioned them off in different sizes. The smaller blocks had more strict [rules for building networks on those airwaves quicker], for example. The larger, C block had a more open platform requirement, but it had less [stringent] build-out rules. The D block had a public safety requirement.

While it's been a significant success of this auction that we've been able to raise more money for the federal treasury than ever before, revenue raising alone is not the commission's purpose. We want to make sure that the spectrum is being efficiently utilized, and utilized in the public interest. Making sure the spectrum is utilized efficiently will ultimately return more real value for the economy and consumers than anything else. So instead of comparing prices for different blocks, you have to look at the success of the auction as a whole. …If you compare the price per megahertz for each of the different blocks to what we've raised in past auctions, each block, including the C block, raised more.

The D block, intended for use by public safety agencies, is the only chunk of the spectrum that barely drew any interest. What do you think happened?

Trying to resolve some of the public safety concerns is a significant public priority. I've always been hopeful that someone would take on the burden of working with public safety to build out a public safety network. I'll continue to be hopeful until the auction ends up closing. If no one [takes the spectrum], then we'll have to go back and evaluate the conditions that were imposed, requiring [the winner] to work with public safety, and the minimum bid prices that we've put in place.

This administration will be leaving office in a matter of months. What would you say will be your legacy at the FCC?

I certainly think that the success of this auction, the success of raising more money than the commission ever raised before in an auction, the success of moving forward with a more open platform that will transform the entire wireless industry is going to be a significant accomplishment.

Kharif is a senior writer for BusinessWeek.com in Portland, Ore.

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