Forces of change or forcing change?

With the 700 MHz auction rules officially out (and before any legal challenges are launched), now is a good time to reflect on the government’s role in spectrum auctions.
In the past, when the government has tried to craft rules to mandate competition, it has generally backfired. I suspect this time won’t be much different.
The entire 1996 Telecommunications Act was designed to spur competition between cable providers and telecommunications carriers. However, the result was the exact opposite. In both industries, the strongest players bought their competitors, thus consolidating the market into the handful of players we have today. Now, on their own, cable companies and telecom carriers are starting to compete in each other’s markets, but it’s because of market forces-i.e., people demanding broadband communications-rather than a congressional mandate passed more than a decade ago.
Likewise, when the Federal Communications Commission deemed that smaller players, or designated entities, should be given special treatment to play in the PCS auctions-again to jumpstart competition in the wireless space-the effort backfired. In short, some of those bidders didn’t have the funds to pay for what they had bid on. As a result, the FCC tightened the rules so only companies with enough money to pay for licenses could bid on them.
I see the same problems with the 700 MHz auction. Why would a large, successful carrier bother with the strings attached to the public-safety spectrum? Maybe a carrier would bid on the spectrum for benevolent reasons, but would that carrier’s shareholders appreciate the buildout costs? Or, perhaps an upstart can build a public-safety/commercial network, but it has to be an upstart with a lot of experience and capital and a strong business plan.
And why would established players bid for the open-access spectrum when they can more easily bid on slices of spectrum elsewhere to grow their networks in the way they want? And, similarly, new entrants-whether Google, venture capitalists or satellite players-would have to be able to stomach a minimum $4.6 billion spectrum bill, an expense that would not include network-buildout, customer-acquisition and network-management costs.
I’m not saying the 700 MHz auction will be a complete bust, but if there is a new entrant, it will be because of the business model, not the FCC rules.