Crucial Block Goes Unsold as Wireless Auction Nets $19B

The Federal Communications Commission raised a record US$19.5 billion with its wireless spectrum auction, which officially closed on Wednesday.

The auction, which started Jan. 24, consisted of 261 rounds of bidding for five blocks of the 700 MHz spectrum. The revenues will be transferred to the U.S. Treasury by no later than June 30, and will be used to bolster public safety and digital television transition initiatives, FCC Chairman Kevin Martin said.

Open Networks

All told, the minimum bids were met on four of the five blocks, resulting in 1,090 licenses issued, including the much sought-after Block C spectrum that was mandated to be operated as an open, national mobile network. The mandate is in stark contrast to the way networks now tie consumers’ handhelds to a specific phone carrier.

“With the open platform requirements on one-third of the spectrum, consumers will be able to use the wireless device of their choice on those networks and download whatever software or applications they want on it,” said Martin.

While the revenues nearly double initial financial estimates, the Upper D Block — which was set aside for public safety and private partnership initiatives — didn’t receive a bid that met the $1.3 billion minimum. The commission will continue to look at options for either development or sale of the spectrum.

Auction Anomalies

The auction — by several accounts — was considered a success, raising more money than the last 68 FCC auctions. However, the bidding produced some interesting trends, Greg Attiyeh, managing for director for Baltimore-based FTI Consulting, a global business advisory firm, told the E-Commerce Times.

In some areas, the A Block spectrum, which covered geographical regions, was sold at a lower cost than the B Block spectrum, which covered individual cities or counties. The reason: Small players were likely trying to protect their businesses, many of which deliver roaming services to large carriers, so they needed to bid high in order to ensure the purchase.

“There are smaller, regional players many of whom were trying to purchase this for data services,” said Attiyeh. “They may be roaming providers. If you put those together, the smaller carriers really had a great incentive to buy.”

No Immediate Gains

Anomalies and finances aside, consumers won’t be able to judge the success or failure of the auction for at least three years, said Attiyeh.

The company that purchased Block C, for instance, will need to spend the next several years building the infrastructure necessary to work with the newly released spectrum. That means placing new hardware at cell locations and getting newly equipped handhelds to customers, both of which are expensive propositions.

Until there is a critical mass of customers, there likely won’t be a rush of new applications and services; and getting that critical mass won’t come cheap.

“Any time you want your customers to upgrade to the latest greatest handsets, you have to subsidize this,” noted Attiyeh.