[opendtv] News: Airwaves, Web Power at Auction
- From: Craig Birkmaier <craig@xxxxxxxxx>
- To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
- Date: Tue, 22 Jan 2008 06:56:51 -0500
http://www.nytimes.com/2008/01/22/business/22spectrum.html?th&emc=th
Airwaves, Web Power at Auction
By STEPHEN LABATON
Published: January 22, 2008
WASHINGTON - The auction for rights to a highly valuable swath of the
nation's airwaves will begin Thursday and is expected to include
multibillion-dollar bids from the nation's two biggest wireless phone
companies, Verizon and AT&T, as well as Google.
Although industry executives and analysts agree that Google is
unlikely to win any licenses, the company already has an invaluable
victory: in setting the auction rules, the Federal Communications
Commission has forced the major telephone companies to open their
wireless networks to a broader array of telephone equipment and
Internet applications.
The radio spectrum licenses, which are to be returned from television
broadcasters as they complete their conversion from analog to digital
signals in February 2009, are as coveted as oil reserves are to
energy companies. They will provide the winners with access to some
of the best remaining spectrum - enabling them to send signals
farther from a cell tower with far less power, through dense walls in
cities, and over wider territories in rural areas that are now
underserved.
And the licenses are on the auction block just as it is becoming
obvious to industry players and investors that wireless broadband is
rapidly becoming the next big thing, the mobile Internet.
The latest government report indicates that in 2006, mobile wireless
high-speed subscribers grew nationwide by more than 600 percent, and
that during the last half of the year, those subscribers made up
nearly two-thirds of the total growth in all high-speed lines.
Equipment makers and content providers are rushing to bring out new
products as consumers increasingly use mobile phones and laptop
computers to wirelessly connect to the Internet.
"The spectrum that we are auctioning off is going to be the building
blocks for the next generation of broadband services," said Kevin J.
Martin, the chairman of the Federal Communications Commission, in an
interview last Friday. "It can carry lots of data, penetrates walls
easily, travels far and allows for very good broadband wireless
service. It will allow a wireless platform to be another competitor
in the broadband space."
The F.C.C. has set a minimum price of $10 billion for five blocks of
licenses - 1,099 in all. The largest amount received by the
commission in a previous license spectrum auction was $13.7 billion
in 2006. Some analysts believe that record could be exceeded when
this so-called 700 megahertz auction is completed in the next few
months.
Each day, the commission will post the leading bids, but only the
amount bid, not the names of the leading bidders.
The auction's daily bids can be watched on the Web site, auctions.fcc.gov.
Because the commission's anticollusion rules preclude the bidders
from discussing their strategies or possible bids, none of the major
companies involved in the auction would comment for publication.
In setting the rules for the auction to some of the most valuable
radio spectrum licenses ever issued, the F.C.C. decided last year to
endorse one of Google's proposals by requiring that the winning
bidders open their networks to a wider array of applications and
phones. (Verizon and AT&T objected to the decision.)
The new rules have already begun to reshape the rapidly emerging
wireless broadband industry. It prompted Verizon and AT&T to change
their policies and open their networks to new applications and
devices, just as Google and its allies had hoped.
"The issue has melted away," Mr. Martin said. "It is no longer as
controversial, as the major providers have moved to open up their
networks."
While Google has promised in return to bid at least the minimum
reserve amount of $4.6 billion for one block of licenses, most
analysts expect the company will be outbid because it is not expected
to go higher.
"Google's intent was to win the open access rule, and that's what its
bidding is about," said Blair Levin, a former senior F.C.C. official
who is now an analyst at Stifel Nicolaus.
Despite losing the battle in the fight over whether to open their
networks to rival software and equipment makers, Verizon and AT&T are
likely to be winners in the auction. Since the licenses and build-out
requirements for the networks are so expensive, experts say, it is
unlikely that a new entrant will prevail, although some niche players
in a handful of regional markets could take home some licenses.
"Most are of the view that we are unlikely to see a major new entrant
coming in and establishing a new presence," said Carol Mattey, the
national leader of the telecom regulatory consulting services at
Deloitte & Touche. "Given the amount of money that would have to be
spent not only on the auction but also on building a new network, it
is pretty unlikely that anyone new will come out."
Verizon and AT&T as winners could be a mixed blessing for consumers.
While the two companies would be able to offer more and faster
services over greater areas, it also could mean that prices, which
have already stabilized as a result of the widespread industry
consolidation, will not fall.
One of the most closely watched licenses will be the so-called
D-block, which is heavily discounted because the winning company must
share the spectrum with public safety officials. But this month, a
company interested in the license, Frontline Wireless, announced that
it had closed, apparently because it was unable to obtain financing
for the license, which has a reserve price of $1.3 billion.
The company was founded by Reed E. Hundt, a former chairman of the
commission, along with veteran wireless executives and a group of
Silicon Valley venture capitalists.
The commission has not said what rules it would rewrite for a second
auction if no bidder meets the minimum price of $1.3 billion for the
D-block.
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