There may still be hope for the D-Block public/private concept.
The FCC’s 700 MHz auction was a big success, no matter how you cut it. It raised a total of $18 billion for 1,090 licenses. The one exception was the D-Block, a single nationwide license for a total of 10 MHz of paired spectrum (5 MHz each in uplink and downlink bands) that failed to attract bids even close to the reserve price of $1.3 billion.
In contrast, the 12 MHz C-Block licenses for the entire nation collectively brought in winning bids of $4.7 billion.
The main reason the D-Block didn’t see more bidding enthusiasm is clearly its ties to public safety entities. Any winner of the D-Block license would be compelled to collaborate with the Public Safety Spectrum Trust (PSST), the license holder for the adjacent block of spectrum allocated for public safety use.
The way the deal was supposed to work is that the D-Block licensee would build a Shared Wide Band Network (SWBN) that would provide service to both public safety entities and the licensee’s commercial customers. The SWBN would be able to use both the D-Block and public safety spectrum, effectively giving the D-Block licensee about twice the spectrum for which it paid.
The PSST would contribute its spectrum to the venture, but none of the capital required to build the SWBN. On the other hand, public safety entities would be expected to pay for using the SWBN once it was built.
DETERRENTS
At first glance, this would seem to be a great deal for the D-Block winner. It would get a “two for one” deal on spectrum price and a substantial captive (and not particularly price-sensitive) customer base for its new network.
So why the lack of auction interest? I believe there were three main factors. First, the network specifications released by the PSST prior to the auction, and which the SWBN would presumably have to 
meet, calls for an aggressive buildout schedule that would most likely have capex running well ahead of the network’s revenue stream for years. Second, the network specification also mandates a very high level of service reliability – essentially “disaster-proofing” the SWBN.
That’s certainly understandable for a network intended to provide public safety communications but it could substantially add to the buildout cost. Finally, private entities with access to this amount of capital tend to be leery of mandated collaborations with governmental agencies and the bureaucratic entanglements likely to result.
The FCC is clearly disappointed that its experiment with public/private partnership in spectrum use was not a winner, but it hasn’t given up on the idea. It has solicited a couple of rounds of public comments on how to proceed, and it’s likely that some sort of re-auction of D-Block spectrum will happen next year. What form the license (or licenses – some of the comments to the FCC recommend regional rather than nationwide licensing) will take, and whether required partnership with the PSST will continue to dampen enthusiasm, is yet to be determined.
NEW IDEAS
I believe there are a couple of innovative ideas that could go a long way toward making the D-Block and the SWBN successful for both commercial and public safety interests.
In order to rein in the capex of providing coverage in thinly populated areas, the SWBN could use an overlay of service provided by either high altitude airborne platforms – most likely balloons – or satellites. Such an overlay service wouldn’t provide much capacity, and it would be expensive to operate, but it could be deployed in a relatively short timeframe and at much lower capital cost than tens of thousands of terrestrial base stations.
As usage expands, those base stations could be added as justified by revenues, which should allow a shorter timeframe to positive cash flow. The overlay system also could provide emergency backup for localized or even regional terrestrial network outages, largely addressing the reliability issue.
CORPORATE CUSTOMERS
Another idea that could make the D-Block more commercially viable relates to market segmentation. Built to meet the needs of public safety, the SWBN will probably be overkill for consumer-level voice, text messaging and Internet access services. In particular, the Internet will present too much vulnerability for extremely sensitive, possibly national security related public safety communications.
What this means is that the public safety data communications carried by the SWBN will need to connect directly to a private IP network rather than the Internet. This will present some unique network architecture requirements for the SWBN that other commercial data networks, which are in essence no more than wireless ISPs, don’t have to deal with. But if the SWBN can connect to one private IP network it 
can probably connect to many more, giving rise to the possibility of offering wireless private network service for enterprises.
What sort of enterprises? How about the electric power industry, which is currently planning a massive automation of the power grid? The so-called “Smart Grid” will need plenty of M2M data communications to support advanced automation, and much of it can most cost-effectively be provided with a wireless data network.
Because we are talking about power grid operations, the issue of security is paramount, and the power industry will not rely on the Internet for critical communications. Similar to the public safety community, wireless Smart Grid data communications will need to connect directly to private data networks. And also like public safety, Smart Grid communications will need enhanced reliability.
Customers such as the power industry, which requires secure and reliable wireless data communications, can either build their own networks at enormous cost (and assuming they can get access to the required spectrum) or they can use commercial services from a carrier that meets their needs.
It’s a market that seems tailor-made for the 700 MHz D-Block. Along with innovative approaches to reducing initial deployment capex, that might just make the numbers work for potential D-Block licensees.
Drucker is president of Drucker Associates.
He may be contacted at edrucker@drucker-associates.com.