D-Block report sheds new light on players’ plans: Cyren Call planned MVNO over 700 MHz spectrum

Public Spectrum Safety Trust Corp. Chairman Harlin McEwen appears to have distanced himself from a key element in a new Federal Communications Commission inspector general report, which cleared Cyren Call Communications Corp. of any wrongdoing prior to the failed auction of the 700 MHz D Block. The report also described now-defunct Frontline Wireless L.L.C.’s concerns about Cyren Call’s plan to become a mobile virtual network operator (MVNO) that would resell service to first responders across the country.
McEwen said he wasn’t present at a meeting last fall cited in the FCC IG report in which Cyren Call Chairman Morgan O’Brien told then-Frontline Wireless Vice Chairman Reed Hundt that Cyren Call wanted to create an MVNO that would buy spectrum wholesale from the D Block winner and resell it at a higher price to public-safety agencies.
When asked about Hundt’s recounting of the meeting with O’Brien in the FCC report, McEwen said, “That does not jibe with anything I’ve discussed with Cyren Call. . [Cyren Call] never discussed anything like that with us, and we would never have approved anything like this.”
A PSST informational document for prospective D-Block bidders includes a section envisioning a “virtual public safety user network,” but indicates it would be operated by the PSST. The PSST is the FCC-approved 700 MHz public-safety broadband licensee. Cyren Call was selected by the PSST in a competitive process to be the advisor/agent to the PSST that would help negotiate a network-sharing agreement with the winning bidder of the 700 MHz national public safety-commercial license.
The allegations
The probe of the FCC inspector general was prompted by allegations that Cyren Call demanded of prospective D-Block bidders a $50 million-per-year lease payment for access to 700 MHz public-safety spectrum. The report concludes the annual $50 million payment that may, or may not, have continued throughout the 10-year license term was only one factor contributing to the reluctance of any D-Block bidder to offer the $1.3 billion reserve price for the license. Frontline Wireless, at one time considered a leading contender for the D-Block license, folded less than two weeks before the Jan. 24 start of the 700 MHz auction.
The FCC is set to launch a new rulemaking May 14 to consider changes to the D-Block license, with an eye toward re-auctioning the spectrum later this year.
Meantime, Congress, which also is looking into the D-Block fiasco, has signaled it will continue investigating the matter irrespective of the FCC probe. Rep. Henry Waxman (D-Calif.), chairman of the House Committee on Oversight and Government Reform, is investigating the relationship between Cyren Call and the PSST. At an April 15 hearing on the 700 MHz auction results, House Commerce Committee Chairman John Dingell (D-Mich.) requested documents relating to relationships among the PSST, Cyren Call and venture capital firms that have invested in Cyren Call.
The reactions
Reaction to the FCC IG’s report was mixed, with Cyren Call and PSST saying it was time to move on.
Others focused on the FCC’s role in the situation.
“We are pleased that the commission responded swiftly and thoroughly to our request for an investigation [into] whether any rules were broken during the bidding for the D Block in the recent spectrum auction. It appears there were none,” said Gigi Sohn, president of Public Knowledge.
Public Knowledge and other groups had asked the FCC to investigate the D-Block issue.
“However, even this narrow investigation showed that the D-Block auction was fatally flawed by terms and conditions set both by the commission and by the public-safety community,” Sohn said. “The controversial $50 million lease payments suggested by the public-safety community to potential bidders were only one factor. While the inspector general found that none of this was against the rules, the conclusion needs to be drawn that the auction was doomed to failure. The commission should take a more active role in future auctions to make certain public safety receives the spectrum it deserves. We look forward to the commission’s notice on the next version of the auction.”
Harold Feld, senior VP of the Media Access Project, said the FCC investigation is good first step in re-examining D-Block rules in advance of the re-auction.
“The inspector general report resolves critical questions as to whether Cyren Call, PSST, or potential bidders violated the commission’s rules or acted with improper motives in the period before the auction,” said Feld. “Happily, it appears no rules were broken. These facts could not have been established with certainty without the IG investigation.”
Feld added that the FCC needs to be more engaged in the upcoming rulemaking on the D-Block re-auction.