FCC's Auction: Not Going According to Plan?

Posted by: Olga Kharif on January 28, 2008

Now that various players have had four days to place bids for various chunks of airwaves that the Federal Communications Commission (FCC) made available in Auction 73, it appears this auction isn’t going according to FCC’s plan.

I went back to look at what bidding looked like at FCC’s Auction 66 — another overhyped auction of wireless airwaves that took place back in 2006. That auction ended up netting nearly $14 billion after 161 rounds of bidding that took place over 29 days. At Auction 66, initial bids were also quite low, but kept rising at double digits after each round. Back then, it also became clear relatively quickly which pieces of spectrum the buyers were after, and which pieces of spectrum no one wanted to touch.

If Auction 73 proves to be at all similar to Auction 66, open wireless networks initiatives may be in trouble. Right now, bidders don’t seem to be overly excited about chunks of spectrum with the FCC-mandated open provisions. Networks built on this spectrum would have to allow all software and devices to connect to them. Search king Google has been begging Washington to impose open conditions on the spectrum for months. Lots of other companies, including eBay and Dish, lobbied in their favor as well.

But bidding for these chunks of spectrum, nationwide C and D blocks, is going slowly. Already, analysts speculate that block D may end up without any takers. As wonderful as open network ideas may sound to consumers, it appears that they don’t sound like music to the ears of wireless businesses — at least, at this stage of the bidding game.

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Reader Comments

Noel Janda

January 28, 2008 11:32 PM

The article's view that the bid price is the end all completely misses the point. It is no surprise that traditional wireless vendors aren't excited about open bandwidth. It infringes on their monopoly of the spectrum, which is fundamentally what they buy when they acquire the spectrum. What is in the best interest of the country and the development of technology is for the FCC to make a significant percentage of spectrum only available on an open basis. There are certainly issues that would have to be addressed that are part of what a monopoly have (such as capacity planning and coordination), but these are minor issues compared to the benefits that open spectrums would bring to the table in the form of standards and product development designed to utilize these spectrums. The innovations that opening these spectrums would bring to the market and the attendant business development dwarf the receipts the FCC is seeking to acquire from selling our wireless spectrum to a few large monopolies. This ccountry's economic strength comes from not only from large companies but also small innovative companies that change paradymes. Consider Apple, Microsoft, Google, etc. The high ground in communcations today is wireless mobility. Realize the potential by making a wise decision to open the development of products to more than a few large monopolies. And realize that the economic benefit from spectrums sales go way beyond the inital sale of spectrum. The FCC has the opportunity to generate an entire now industry that will create massive revenues and thousands of jobs.

TeleTips Network

January 29, 2008 02:35 AM

Hey, it's not the requirements for openness that scares investors. It's the part about tossing the keys to the public safety organizations when all hell breaks loose. How is one to make money when at the time of maximum usage, a crisis, customers lose their access to the network?

jauy

January 29, 2008 05:09 AM

It is a bit early to call this one. The D block is less popular because it requires a fast build-out and a big chunk of the spectrum has to be dedicated to "public safety" services, NOT because of the "open" provisions.

The C block has only three substantial bidders -- Google, ATT and Verizon. In that type of bidding I wouldn't expect to see the best bids until later. As of yesterday, the bids total $6.1B out of the $10B reserve after only 3-4 days of bidding.

In short, your premises "not going according to plan" and "not overly excited about ... open provisions" do not appear to be supported by the numbers.

Rick

January 29, 2008 07:32 AM

Of course not, but profit to the government should not have been the primary goal. An open network means a lesser opportunity for profit due to increased potential competition. So, it should be worth less.

But, to the consumer, increased competition created in an open spectrum should means lower prices at the retail level. Sounds like a good deal to me.

anonymous

January 29, 2008 09:41 AM

Why bid? Now that we know these signals cause sleeplessness, cancer & headaches, all these technologies will have to be replaced by fiber optics.

Sean

January 29, 2008 10:16 AM

Where is the "slap" button on the keyboard when you need it? I'll continue to enjoy my cell phone, radio, and wireless internet while you plug into a copper or fiber line for everything. You probably face more risk of being killed by an Alligator than getting cancer from the small EM signals emitted from cell phones and such.

decline

January 29, 2008 10:26 AM

why bid on one these open blocks now when the fcc has said if the reserve isn't met they will be re-auctioned without it. i mean the fcc might as well be shouting at companies, don't bid now! just wait until we loosen the restrictions.
how about, i will sell you a car now you have share with the neighbors, or you can wait and buy it later and not have to share it? gee what would you do?

anonymous II

January 29, 2008 10:28 AM

since you "Now know that these signals cause cancer, headaches and sleeplessness" you should publish your findings in a respected journal, perhaps Nature or NEJM, and share your rigorous findings with the world.
also I am concerned about tripping hazards involved with fiber-optic mobile phones.
think of the children! won't someone think of the poor children?

Anonymous Reply

January 29, 2008 10:44 AM

How are you going to use a wireless fiber optic phone?..

Jauy

January 29, 2008 11:02 AM

In this auction "open network" simply means that phones/devices andsoftware applications and not provided by the spectrum owner, can be used on the network. Everyone still has to PAY!

Verizon initially opposed this idea, but on second look has become one of the bidders. Nothing for investors to fear here, unless you think that telecommunications companies make big profits on the telephone sales.

Anon

January 29, 2008 11:17 AM

A lot of good fibre will do if you're not at a fixed location! Want to guard yourself from all RF? Build your house out of lead. Everything gives you cancer. Don't drink the water, don't eat fish, don't eat beef, don't eat processed foods, heck don't eat, don't breathe; you could get cancer. Oh, and those TV stations that are vacating those frequencies have been continuously transmitting there at high power for years blanketing all who live within a couple miles of the tower with the same amount of RF energy as a 100mW wireless device would within 3m of your body (based on 10dBi/50kW vs 100mW field strength figures. Mind you that TV xmits continuously and data from digital cell phones etc is pulsed and continuously adjusts output power as necessary often much below rated maximums). Guess they're all dead. I guess while we're at it, we should eliminate radar. They're at even higher, more dangerous frequencies and transmit even more power! (1MW @ 5GHz) The sky is falling!!

Dewey

January 29, 2008 12:06 PM

Anonymous is obviously a TECHTARD!

Hank Roberts

January 29, 2008 12:24 PM

You can sure tell when the epidemiological work has turned up something that's significant. The innumerate show up to exaggerate and misstate.

Yes, it's a small effect; it appears real, though. Nowhere near as strong as a lot of other risk factors, that's true.

Precautionary principle, anyone? Oh, wrong country.

Dr Wavelength

January 29, 2008 12:24 PM

A wireless fiber optic phone is easy to make.
1. Put 50 miles of fiber in your trunk on a large spool.
2. Back your car up to the house, plug in the fiber optic into your home network, and the other end into a Radio Shack CB radio.
3. Drive to the mall, and carry around another CB radio that can communicate to the one in the car. Leave the kids in the car to switch frequencies for you.
4. Be advised, it won't work in the summer, not because of the Ionosphere, but because the kids will either bake in the car, or eat your life saveings in Ice Cream !
..
But... it will work.. sorta...kinda..

Parley (KI6BVO)

January 29, 2008 12:58 PM

Well, except that CB's are rated at up to 5W. A much higher power than cell phones.

Blahpedia

January 29, 2008 01:56 PM

Very nice Dr wavelength...

I thought Verizon was going to be banned from the auction due to law suits against the FCC.

we need open networks.. =)~

www.blahpedia.com

Big Trunk ?

January 29, 2008 02:16 PM

I wanna see the trunk of Dr. Wavelength's car. I think the doc has brought back the VW bus, but in style, and SUPER-SIZED!! :-)

Knoop Bobby Bob

January 29, 2008 04:52 PM

Dewey wears a Unitard!
Lively discussion, gents.
Spectrum Boy

Anonymous

January 29, 2008 05:23 PM

Critical mistake in your article: You depict the C and D Blocks as having a wholesale requirement.

The wholesale requirement only applies to the C Block.

Jauy

January 29, 2008 09:43 PM

Ok, according the chart in the article, auction 66 bids were about $3B after round 12 and it ended at $14B.

This auction has reached $8.7B at round 12. So I am still mystified how the article concludes this auction is "going slowly" and how "open wireless network initiatives may be in trouble". How does the data you present support that conclusion?

Now, this could be another nail in the coffin for traditional printed media -- like newpapers and magazines, due to the "internet anywhere" goals of Google.

Maybe that is the real hot story here?

Jim A

January 30, 2008 09:08 AM

Upper Band D Block Public Safety spectrum will fail:
Beacuse:
1. Cities/Counties and State entities fully expect to have 24/7 access to this spectrum and are planning on it as we speak. They look to use it to replace most of their Cell Data and 800Mhz networks.
2. Has anyone ever negotiated with a Quasi Government entity for use of services and expect to make a serious Business Case, expecially one that risks $1.3Billion?
3. Police and Fire teams day to day actions are considered Public Safety/First Responder functions and therefore will need 24/7 access to all this spectrum. WhHere is the commercial value here

The FCC and COngress will eventually go to Verizon Wireless to build this network and work special deals with them after the auction fails to meet the minimums in this area.

Jacomo

Auction Lover

January 30, 2008 12:31 PM

Why is this FCC auction not like eBay auctions where the real action, and the high price is set, in the last 60 seconds?

Scott Reiter

February 22, 2008 07:42 AM

The FCC should split the spectrum in auctions into counties so that small businesses can get more involved. This would actually help the taxpayers by bringing in more money than the large swaths of spectrum sold in auctions that can only be bought by large telecoms. Look at this auction's price per pop comparing the B block to the C block. Newport News Virginia has a current winning bid of over $13 million dollars for less than 1/2 million pops. For 10-20x that money you can buy an entire region with 30-50x the pops. But only a large telecom (pronounced oligopoly) can afford the upfront payment.
I'll never forget Auction 35 when Alaska Native Wireless(really a front for AT&T) and Salmon PCS(a front for Cingular) bought most of the big licenses getting the small business discount of 35%. If you look at the financial disclosures, they listed 0 income and 0 assets. I still don't understand how the U.S. government allowed a company (Alaska Native Wireless + Salmon) to buy OVER $2 BILLION DOLLARS WORTH OF SPECTRUM EACH if they honestly had no income or assets, as they claimed in their ownershio filings. (public information on the FCC website)[ownership filing below under ExhibitC+D:]
http://wireless2.fcc.gov/UlsApp/ApplicationSearch/applAdmin.jsp?applID=677220#
http://wireless.fcc.gov/auctions/35/charts/35press3.pdf
The large telecoms can buy the spectrum with or from the small businesses in the auction that are paying retail. This would be good for everyone, as the taxpayers get a higher price for the spectrum, the small business gets a chance at more spectrum because its broken into smaller pieces, but the big telecoms dont get the big wholesale pieces that they pay lobbyists to allow.

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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