FCC Mulls Cos' Positions On Auction Of Prized Radio Spectrum

WASHINGTON -(Dow Jones)- The Federal Communications Commission's consultation on the rules of its upcoming radio spectrum auction closed this week, and in their last-minute submissions few of the likely participants in the auction changed the arguments they had been making in private in recent months.

Most of the companies and groups that made submissions to the consultation waited until the midnight Thursday deadline so as to not allow others the opportunity to alter their positions to reflect competitors' comments.

Heading into the Memorial Day weekend, FCC officials are left with the task of sifting through the hundreds of submissions and determining how the rules governing the auction should be structured.

The auction must begin no later than the end of January 2008, and the FCC has signaled it wants the final rules in place by the end of June or early July to allow potential bidders to line up funding and get business plans in place.

The sale of 60 megahertz of prized spectrum promises to be the most closely followed proceeding in the telecommunications regulatory environment this year, as it will raise billions in revenue for the U.S. Treasury and largely determine how the marketplace for wireless broadband services will develop in the U.S.

The shortened month-long consultation period certainly achieved one of the commission's goals set out at its last public meeting: to establish a record of evidence upon which to base its decisions.

Commission staff in the Wireless and Public Safety bureaus now have to make recommendations to the five FCC commissioners about how the auction should proceed.

The spectrum coming available as a result of the transition by television broadcasters to a digital from analog signal is widely seen as being the most powerful, and therefore most valuable, in a generation.

An auction of less powerful spectrum was auctioned off last year, raising $13.5 billion for the U.S. Treasury. Analyst estimates are that the forthcoming auction will raise at least that amount, with some saying it could generate as much as $30 billion in revenue.

Providers of wireless broadband services are eager to bid for it, as it will allow them to extend offerings to a wider commercial audience.

The commission must decide whether to structure the spectrum in large or small blocks, and whether the licenses will be allocated on a local, regional or a national basis.

It must also pass judgment on the Frontline Wireless plan, which would see extra rules attached to 10 megahertz of the 60 megahertz to facilitate the creation of a national wireless broadband access for joint use by both commercial operators and emergency services users.

Verizon Wireless has been among the most active of the incumbent cellular companies in its lobbying efforts at the FCC.

In its submission, the company argued that the spectrum should be auctioned off in large regional blocks, which could then be patched together if one entity successfully bid for more than one.

It is likely that few companies could afford to participate in an auction for a chunk of spectrum as large as 22 megahertz, which Verizon is advocating.

Verizon finds itself in agreement with a group called the Coalition for 4G in America, which said that the FCC should structure the rules to ensure that a third competitor to the dominant telecommunication and cable broadband providers could enter the market.

In order to offer up meaningful competition to Verizon, AT&T or the larger cable companies, a third entrant would need to be able to establish a national footprint. Successfully bidding on a large chunk of spectrum would allow that.

That group includes Google, Yahoo, Echostar Communications, DirecTV, a unit of News Corp., Intel, Ebay's Internet telephone service Skype and Access Spectrum, a group that already controls some spectrum.

"Many even have touted the upcoming 700 megahertz auction as the last great opportunity to fashion the long-awaited "third broadband pipe" to serve America's consumers," the Google submission said.

The key difference between the members of the 4G coalition and Verizon Wireless is that the former group wants the FCC to allow package bidding, which would enable groups to join together to bid for spectrum.

On the other side of the debate are a large number of companies that are lobbying for smaller chunks of spectrum and local and regional licenses, which would allow them to compete with the large national operators like Verizon Wireless.

These include MetroPCS Communications, one of the fastest-growing wireless broadband providers that recently floated on the New York Stock Exchange; Alltel, the largest of the second-tier cellular operators, catering mainly to the rural market; and Sprint Nextel, which despite being one of the big three cellular companies trails well behind its two larger rivals in size.

For these companies, the spectrum auction is a key event in allowing them to expand geographic footprint and customer base.

"To the extent the commission believes that additional competition is necessary in the already competitive wireless industry, it should not predetermine that the answer is to foster only a single new entrant by allocating one large spectrum block," argued MetroPCS in its filing.

Besides determining how the commercial auction will be structured, the FCC must also decide on whether it will allow Frontline Wireless to proceed.

The group has an impressive list of backers, including former FCC Chairman Reed Hundt, prominent Republican telecommunications lawyer Janet Obuchowski and Haynes Griffin, the founder of one of the original cellular companies, Vanguard Cellular.

It found few friends among respondents to the FCC's consultation, with opponents Verizon Wireless, AT&T, Sprint Nextel, MetroPCS strongly urging the agency to deny Frontline's petition in their filings. On the positive side, both Google and Skype publicly endorsed the plan for the first time.

In response to comments made by Verizon, Frontline issued a statement Thursday decrying its position.

"Other competitors deserve a chance to bid on the last remaining morsel of airwaves before the reconstituted pair of Ma Bells lock it up, and close down competition and innovation in wireless broadband for decades to come," said the Frontline statement.

Participants in the consultation now have a seven-day period in which to respond to any claims made by others. All eyes will then be on the FCC to see how the auction will proceed.

-By Corey Boles, Dow Jones Newswires; 202-862-6637; corey.boles@dowjones.com

(END) Dow Jones Newswires"

Posted to the site on 25th May 2007