THE 700 MHZ AUCTION, continuing to crawl toward an end likely punctuated by a disappointing D Block failure, will not remain totally within the Federal Communications Communication’s province when bidding finally ends. Congress is about to jump into the fray.
Rep. Edward Markey (D-Mass.), chairman of the House telecom subcommittee, plans to hold a post-700 MHz auction hearing to examine how to proceed with a national commercial-public safety license that observers believe – and FCC Chairman Kevin Martin finally concedes – is probably a lost cause in this auction.
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“I do recognize that the concerns that public safety raised seem like they are too great at this point for anyone to be willing to put in a bid and work with public safety,” Martin was quoted as saying in an appearance before the House telecom panel.
Auction haul could impact D Block plans
The D Block has remained idle since attracting a $472 million bid in Round 1. The FCC was to complete Round 81 on Friday, with the agency suspending bidding Feb. 18 in observance of Presidents’ Day.
Markey’s hearing will not happen right away. The FCC will need to announce 700 MHz auction results – the winner(s) of the open C Block arguably the most anticipated – and lift the anti-collusion gag rule so the telecom subcommittee can round up witnesses able to talk freely at the hearing.
The FCC has attracted nearly $20 billion in bids – twice as much as government officials expected – for the 1,099 licenses up for bid in a 700 MHz band highly regarded because of the long-range of wireless transmissions and their ability to penetrate building structures. The record-breaking auction receipts – most of which will be deposited in the U.S. Treasury – potentially represent more than just financial success for an administration facing a steep federal budget deficit. Auction revenue could play a role in what happens next to the D Block – which startup Frontline Wireless L.L.C. vowed to capture before inexplicably bowing out shortly before the 700 MHz auction’s Jan. 24 start – if no bidder comes up the $1.3 billion reserve price for the license.
“Such high auction revenues gives the FCC some flexibility to consider all the options before pursuing any contingency plans,” said Jessica Zufolo, a telecom analyst at Medley Global Advisors L.L.C. “If the D Block fails to attract a winning bidder in auction 73, [the FCC’s] actions will be driven by public safety concerns first and foremost and the need to construct a wireless broadband public safety network, not revenue generation.”
Fight expected
Still, there is apt to be feuding at the FCC and on Capitol Hill over what changes should be made to the D Block. Reducing – perhaps even eliminating the $1.3 billion reserve price – could be an issue for debate. The same goes for 700 MHz rules governing the obligations of the D-Block licensee, its relationship to the public safety broadband licensee, build-out requirements and the network sharing agreement the two parties would have to hammer out within 60 days.
In a note, analysts at Stifel, Nicolaus & Co. Inc. said FCC members may ultimately be faced with a handful of imperfect options. “At this point, we believe they are more likely to de-link the D from the other blocks rather than immediately commence a follow-up auction. But, whatever the final decision, it could take them some additional time to agree on that next step, which in turn would push back an announcement of whether the winning bidders on the other blocks will be announced.”
Investigation possible
Moreover, there could be forthcoming efforts to investigate – as public interest advocates have called for – circumstances leading to Frontline’s collapse so there is not a repeat D-Block debacle.
“We now know that only the D Block may not sell in this auction,” said House Commerce Committee Chairman John Dingell (D-Mich.). “The construction of a nationwide, next-generation, interoperable broadband network for public safety is a crucial policy objective, and the need for such a network has not diminished. I intend to work closely with the commission, public safety, and industry as this process continues.”
Meantime, in lackluster action at week’s end, bidders continued their squabble over around 100 licenses that appear to remain in play. The opening three rounds of Friday’s bidding drew 93, 99 and 100 new bids, which was a bump from the 84, 87 and 88 new bids placed during the final three rounds on Thursday. New bids continued to tack on between $4 million and $5 million in potential winning bids per round, with the total potential winning bid amount at $19.45 billion after round 81.
Recent rounds saw increased interest on B-Block licenses, which had gained a majority share of new bids placed. Despite being pushed down the priority scale, E-Block licenses continue to draw the highest new bids and account for most of the increase in total potential winning bids. The six megahertz of unpaired E-Block spectrum is expected to be used for non-traditional cellular services. Qualcomm Inc. has used similar spectrum for its MediaFLO mobile TV service and was expected to use the auction to add to its holdings.
There was some good news for the FCC in that a pair of licenses received their first bids, leaving only seven licenses without a single bid as of round 80. Untouched licenses were all in the B Block and cover Bismarck, Grand Forks and Fargo, N.D., and portions of Virginia, North Carolina, South Carolina and Louisiana.
