Steve Largent is clearly frustrated. CTIA’s president and CEO can’t figure out why the 700 MHz rules turned into such an anomaly, when past auctions rules proved to be so successful. Other auctions such as the recent Advanced Wireless Services (AWS) spectrum were open to the highest bidders. Plain and simple. So what is with all of these changes?
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Rhonda Wickham
Editor-in-Chief |
“We (the wireless industry) got half a loaf,” Largent says. “And actually the spectrum we got was the spectrum that is less desirable.”
The more desirable spectrum he is alluding to is the 22 MHz in the Upper C Block. Although it will be sold as 12 different regional licenses, the FCC will allow companies to bid on it as a nationwide block. That is why it is so attractive to a company such as Google, eBay, or even the recently rumored Apple, which conceivably could start its own national wireless broadband network. Largent says there is no question that companies such as Google and eBay made a genuine push during the rulemaking, but he doesn’t think either ever genuinely wanted spectrum.
“Their goal was to say, ‘We want in the walled garden,’” Largent says. “Some of our carriers, not all, have said, ‘We don’t want you,’ and they didn’t like that. That is why we ended up where we are today.”
Largent also says he can’t figure out what will happen in the big picture if no one ends up bidding the $4.64 billion reserve price on the 22 MHz, and the FCC ends up re-auctioning it. Theoretically, the spectrum would revert to the highest bidder model. But that could catch wireless carriers in a bind.
“What happens to our guys that already bid on that auction (Blocks A and B) but they would really rather have bid on the 22 MHz (in Block C)? But they don’t know if they are going to get it until after this auction is over with. How does that work? You just throw it all back into the mix and say we will auction it all over again? That will take a long time.”
Even under the current schedule, if it all proceeds as it should on Jan. 16, 2008, Largent believes the FCC is going to be “hard-pressed” to have the money in the Treasury by the mandated June 28.
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“We (the wireless industry) got half a
loaf. And actually the spectrum we
got was the spectrum that is less desirable.” —Steve Largent,
CTIA president and CEO
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“I think it is a train wreck that potentially could happen.”
My conversation with Largent got me thinking. What if a Google or another Internet company forms a consortium and delivers the winning bid for spectrum? Is it actually going to try to build out a national network? Headstart and time-to-market issues aside, the winning spectrum holder will have to compete with U.S. incumbents that already are delivering among the lowest wireless rates in the world, with the possible exception of Hong Kong. Besides the $4.64 billion for the spectrum, the winning bidder also would have to shell out at least five to eight times that amount to make the network a reality.
If Largent is right and Google and eBay never wanted to own spectrum and the $4.64 billion reserve price isn’t met, that is a lot of rich spectrum that could have been put to great use by spectrum-hungry incumbents. How do those incumbents bid for what they need to deliver more services in the A and B Blocks when there might be a chance that the more desirable spectrum in the C Block could potentially become available? I suspect there will be plenty of scenario-charting taking place in the top-tier boardrooms. I wonder if we will see any carriers emerge as gamblers. And if so, I’d hate to be the one that guessed wrong and walked away with no spectrum at all.
Finally, the time factor is now troubling me. Four months is not much time to launch and complete an auction this important, if indeed the FCC begins it in January and plans to deliver the final check in June. With the exodus of Bush-appointed public servants gaining momentum as we near the Presidential election, I wonder if Chairman Kevin Martin will be around to manage changes if Block C goes up for grabs. Alternately, if he is still around, will he try to push this auction through for his legacy and resumé. Let’s hope not.