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Auction 73: Winding Down?

Posted by: Olga Kharif on February 6, 2008

A closely watched auction of the airwaves needed to build a wireless network may be winding down — and the outcome bears faint resemblance to what analysts were expecting. For starters, the Federal Communications Commission has so far received nearly $19 billion in total bids, compared with $15 billion to $18 billion that Wall Street had forecast.

What’s more the auction may not last nearly as long as some had thought. Lately, total bids are rising only by less than 0.1% from one round to the next (four to six rounds occur on a typical day). What’s more, on Feb. 6, the FCC began enforcing a new rule that should discourage auction participants from sitting out rounds and to encourage them to place higher bids. Last week, total bids were rising at double-digit percentages from round to round. Some say the FCC could end the auction as soon as this week. Previously, analysts had predicted the action could last as long as several months.

Another take-away: There may not be a single winner for the block C, a swath of spectrum so large it stretches from coast to coast. Many had expected a tug of war between Google and Verizon Wireless for the C block, which will be the basis for the nation’s first “open” network that will accommodate any cell phone from any carrier. But it turns out that there’s been more interest in smaller chunks of block C, and bidders are cumulatively willing to pay more for individual slices than the whole.

Unless bidding patterns change drastically in the next few days (and they could), here’s what that means:

-- Americans will still get their first open nationwide wireless network, but it may be operated by different carriers in different regions. That said, a single carrier, such as Verizon Wireless, may have purchased the majority of the regional chunks and may yet emerge as the core operator of the new open network.
-- Finally, it’s not clear whether Google will become the prevailing bidder for any of the spectrum. Google will nevertheless probably emerge as the biggest winner in the auction. The company had previously said would be willing to spend $4.6 billion in the auction as part of a larger ambition to ensure the creation of an open network where phones could freely run all manner of software applications—notably those Google helps create. And it appears Google got its way, possibly without spending a dime.

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Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. 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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