U.S. 700 MHz auction a yawner so far

Watching the progress of the FCC’s Auction 73 is rather like watching paint dry. We’re talking about the auction for the 700MHz chunk of spectrum, which is being reclaimed from analog TV signals and made available to would-be mobile providers.

The spectrum represents prime digital real estate, due to its optimal combination of range and data rates. It also represents one of the largest blocks of spectrum to come on the market in recent decades, so folks have predicted the auction could yield as much as US$30 billion to $50 billion for the government.

Moreover, the spectrum is offered with some interesting constraints — two in particular. First, prodded by Google, the FCC mandated that purchasers of the C block (two spectrum chunks comprising a total of 22MHz) must permit open access of devices and software. This condition that hasn’t been previously applied to spectrum auctions, and could lead to a burst of innovation, much as the Carterfone decision of the 1970s led to a proliferation of new technologies and competition in the landline realm.

Second, the FCC is mandating that purchasers of the D block (another two chunks comprising a total of 10 MHhz) use portions of the spectrum to create a commercially available emergency response network.

As noted previously, I’m in favour of the open access requirement for the C block, but I don’t think the D block requirement passes the sniff test. The D block configuration was specifically requested by a start-up called Frontline, led by former FCC chair Reed Hundt, which promised to bid on the block. Yes, we need emergency services, but custom-tailoring spectrum offerings to particular companies isn’t the right way to proceed, particularly when there’s a potential conflict of interest (FCC chairman Kevin Martin could well be thinking about post-retirement opportunities). At any rate, Frontline (rather ironically) decided at the last minute not to bid.

So how’s the auction going? Not so great. The raw numbers are promising — last time I checked, the auction had raised nearly $11 billion total since the start on Jan 24.

But bidding for both the C and D blocks have gotten off to a slow start. C block bidding is still in the single digits, and D block only has a single bid. Here’s my guess as to why: The bidders for C block (strongly suspected to include Verizon, AT&T and Google, though bids are anonymous) are being cagey in order to conserve funds. If that’s correct, look for a knock-down-drag-out fight in the last few rounds. (Bidding continues until all the spectrum is sold; previous auctions have run more than 100 rounds).

As for D block: Face it, as currently structured, that block’s a dog. The FCC is going to have to revise the rules, or forfeit the sale, meanwhile prolonging the auction for everyone. As I said previously, it’s a lousy idea to custom-tailor spectrum for your buddies. It stinks, and it’s stupid.

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