User Submitted Blog Post: What the FCC didn't do with the 700MHz auction

The Federal Communications Commission's 700MHz auction is done. It was the biggest auction of publicly owned spectrum ever. The winner is Verizon Wireless. The company spent about 9 billion bucks to purchase six "beachfront" quality spectrum licenses that will give the cell phone giant access to a national broadband market, including Hawaii. Because they purchased spectrum on the so-called "C-Block" of the sale, they will have to open their service to any consumer application. But they're also going to have to put a lot more money into this very expensive new frontier, and they're going to have to do it in what promises to be a nasty recession. That is probably why Goldman Sachs called Verizon's bid potentially risky.

The FCC could not sell off its D-Block, the 10MHz swath of spectrum that came with a large public interest requirement—the winner will have to share the license area with a national public safety broadband service. The goal is to create a huge interoperable communications region for the nation's public safety agencies (fire, police, and medical). But nobody offered the FCC's minimal asking price. So the agency says that it will "delink" the D zone and try to figure out why the bidders wouldn't go for the region and how to get them to.

The good folks over at the Media Access Project (see below) had some guarded praise for the auction. The auction raised a lot of money, they said, thanks to anonymous bidding. Some smaller companies like Echostar got in on the game. Then there's the promise of the C-Block, however that plays out.

But here are some things that the FCC did not do with the the 700MHz region, made available by the end of analog television.

The FCC did not give any spectrum away.

They could have, you know. They could have given licenses away to non-profits, universities, rural cooperatives, Native American reservations, what have you, to offer a wide variety of non-profit based, educationally based, community based services that market oriented entities won't. Sure, it would have deprived the government of money to do this; but it also would have extended resources to people and groups that never get access to this kind of stuff. Guess how many women owned firms won spectrum in this auction? Zero. Guess how many minority owned firms won it? Less than one percent.

The FCC did not establish any public interest parameters for the spectrum

Throughout the deliberations over how to run this auction, a company called M2Z proposed setting aside a big piece of the spectrum for a commercially based, free broadband service that filtered out pornography. The FCC rejected the idea, but not until after a long period of deliberation. Hundreds of organizations, community leaders, and even United States Senators endorsed the M2Z concept.

So don't tell me that setting any public interest guidelines for spectrum isn't possible, or that nobody wants it. Congress could have empowered the Commission to do all kinds of things with the spectrum. They could have required a block of it to go to non-commercial broadband services, or to services that at least adhere to the agency's minimal enhanced underwriting rules for broadcasters. What else? You fill in the blanks.

Congress did not earmark any of the money for public interest purposes

They could have set aside a percentage of that money for public broadcasting, for community radio and television, for minority broadcasters. Hell, it was over 19 billion dollars. THREE percent of that would have meant over half a billion bucks for all kinds of worthy projects.

They did none of this because none of this is discussable in the present political climate. Even most of the good guys don't discuss it. It is a whole world of possibilities completely off the political and philosophical table—for now.

March 20, 2008
For Immediate Release

STATEMENT OF MEDIA ACCESS PROJECT IN RESPONSE TO 700 MHZ AUCTION RESULTS.

The following statement may be attributed to Harold Feld, Senior Vice President, Media Access Project:

This auction proves two things. First, anonymous bidding works. Second, that auctions alone will not bring competition to the wireless world or break the current cable/DSL broadband duopoly.

On the positive side, Echostar -- which had been blocked by the cable consortium Spectrum Co. in the last major FCC auction, won a substantial number of E Block licenses, which will increase its competitive position against cable. The 700 MHz Auction also proved a financial success, bringing in more money than any other FCC auction. Both of these positive results come from the FCC's decision to adopt anonymous bidding -- which prevented blocking by rivals or collusion to reduce prices.

On the other hand, this auction also proves that major incumbents will always be able to win if they spend enough. The advantages an incumbent enjoys -- already having a network, customers, and name recognition for example -- give it enough of an edge to win every time. For Americans to see real competition in the wireless world, Congress and the FCC must rethink the reliance on auctions and return to spectrum caps or other means to limit the power of the existing wireless oligopoly.

Finally, although the open device condition on C Block will help to move Verizon and the rest of the industry in the direction of open networks, the auction failed to establish a genuine broadband "third pipe." In many ways, however, this failure is good news. With the distraction of a wireless broadband third pipe behind us, policymakers can turn their attention to real solutions for the problem of the cable/DSL duopoly that subjects Americans to high prices, slow speeds, and poor service.

In what was undoubtedly the most equal and fairest FCC auction ever held, the incumbents still won the lion's share of licenses. But at least, thanks to anonymous bidding, they paid market value.