The FCC 700 MHz Auction Results [17:10]

Intro: On March 18, FCC Auction 73 bidding round 261 ended and, after 38 days and $19.592 billion in bids (almost double the $10 billion the FCC had hoped for), the FCC closed out the auction. In this podcast we review and discuss the auction results.


Mike: Gordon, can you give us an overview of the auction results?

Sure Mike - this comes from the FCC auction website linked up in the shownotes.

Rounds: 261 (started on 1/24 and ended on 3/18)

Bidding Days: 38

Qualified Bidders: 214

Winning Bidders: 101 Bidders won 1090 Licenses

*Auction 73 concluded with 1090 provisionally winning bids covering 1091 licenses and totaling $19,592,420,000, as shown in the Integrated Spectrum Auction System. The provisionally winning bids for the A, B, C, and E Block licenses exceeded the aggregate reserve prices for those blocks. The provisionally winning bid for the D Block license, however, did not meet the applicable reserve price and thus did not become a winning bid. Accordingly, Auction 73 raised a total of $19,120,378,000 in winning bids and $18,957,582,150 in net winning bids (reflecting bidders' claimed bidding credit eligibility), as shown above.

Mike: Before we get into the auction results, can you give us an overview of the different spectrum blocks? I know we've done this before but - how about a quick refresher?

Sure Mike - this comes from a blog I wrote back on January 14.

Back in 2005 Congress passed a law that requires all U.S. TV stations to convert to all digital broadcasts and give up analog spectrum in the 700 MHz frequency band. This law will free up 62 MHz of spectrum in the 700 MHz band and effectively eliminate channels between 52 and 69. This conversion, which has a deadline of February 18, 2009, has freed up spectrum that is being split up by the FCC into five blocks:

• A-Block - 12 MHz, split up into 176 smaller economic areas
  
• B-Block - 12 MHz, split up into 734 cellular market areas
  
• C-Block - 22 MHz, up into 12 regional licenses
  
• D-Block - 10MHz, combined with approximately 10MHz allocated for public safety, a single national license.
  
• E-Block - 6 MHz, split up into 176 smaller economic areas

So in summary, each spectrum block in the 700 MHz auction, except for the national public safely D-Block, has been assigned an area designation by the FCC.
All FCC areas, along with names, county lists, maps and map info data can be found on the Commission's website linked here.


Mike: How about a quick review of the D-Block again?

Sure Mike, this also comes from that January 14 blog:

The D-Block lately has been most interesting to watch. Early on it appeared Frontline Wireless would be one of the biggest bidders for D-Block spectrum - the company was setup for D-Block and had worked closely with the FCC on putting together specifications for the spectrum. Frontline built a formidable team including Vice Chairman Reed Hundt, who served as Chairman of the FCC between 1993 and 1997. The business plan, the organization, the technology seemed to all be in place........ On January 12 the company placed the following statement on their website:

Frontline Wireless is closed for business at this time. We have no further comment.

Another company, Cyren Call also looked like they were planning to bid on the D-Block Auction but did not.

What happen? Rumor has it Frontline could not attract enough funders - it seemed like a good investment - or at least you may think so up front. Many are now asking if the FCC's approach to solving the public safety inter-operability problem is in trouble.

Mike: OK, how about the results?

Here's a summary from the Wall Street Journal:

Verizon and AT&T accounted for 80% of the nearly $20 billion AT&T agreed to pay $6.6 billion for 227 spectrum licenses in markets covering much of the country. Verizon Wireless, a joint venture of Verizon Communications Inc. and Vodafone Group PLC, won 109 licenses for $9.4 billion.

Dish Network Corp., which bid for spectrum through Frontier Wireless LLC, did acquire a significant footprint, winning 168 licenses throughout the country for $712 million. Satellite-TV providers are looking for a way into the high-speed Internet business to better compete with cable and phone companies. But Credit Suisse analyst Chris Larsen said in a research note that the particular segment of spectrum Dish acquired would make it difficult for the company to offer interactive wireless broadband service. He said the company could use the spectrum to broadcast data or for on-demand video.

Google had indicated interest in a nationwide package of licenses before the auction, but it bid just high enough to trigger rules that will force winners of one segment of spectrum, known as the C-block, to allow any mobile devices and applications on their networks. Verizon won the lion's share of spectrum in this segment. Google had pushed for the regulation since its efforts to sell some mobile services had been stymied by major carriers, which traditionally have strictly limited the kinds of devices that consumers could use on their networks. Even before the auction had wrapped up, Google scored a victory as Verizon voluntarily agreed to open its network to devices it doesn't sell through its own retail network. Verizon released details of its new policy on Wednesday.

Mike: Were there any licenses that dod not get any bids?

There were 1,099 licenses auctioned and only eight did not receive any bids:

A-Block:

Lubbock, Texas
Wheeling, W.Va.

B-Block:

Bismarck, N.D.
Fargo, N.D.
Grand Forks, N.D.
Lee, Va.
Yancey, N.C.
Clarendon, S.C.

Mike: So, what will happen to these?

These licenses will need to be re-auctioned by the FCC. I'm guessing they were over priced, the FCC will end up dropping the re-auction minimum bid and they will end up going quickly.

Mike: What's going to happen with D-Block?

The Public Safety D-Block did not meet the minimum bid and the FCC will have to decide what to do. It looks like the FCC could go one of two directions for the re-auction - drop the price or change the requirements. From the start, the public safety D-Block auction was seen as one of the biggest auction challenges...... I've expressed my opinion on the D-Block in the past........ the FCC still has some major work ahead before they can close this one out.

This comes from InfoWorld:

On Thursday, the FCC voted to de-link the so-called D block from the rest of the auction results. The D block was a 10MHz block that was to be paired with another 10MHz controlled by public safety agencies, and the winning bidder would have been required to build a nationwide voice and data network to serve both public safety and commercial needs. But the FCC failed to receive its $1.33 billion minimum bid for the D block, with the lone $472 million bid coming from Qualcomm.

The FCC has no plans to immediately reauction the D block, a spokeswoman said. Instead, the agency "will consider its options for how to license this spectrum in the future," the FCC said in a news release.

Mike: So, it looks like the big carriers won?

For the most part, yes. Kevin Martin had an interesting quote in an EFluxMedia piece though:

"A bidder other than a nationwide incumbent won a license in every market," FCC chairman Kevin Martin said hinting that it’s possible for a "wireless third-pipe" competitor to emerge in every market across the U.S. This would increase the competition and the first one to benefit from it will be the consumer.

Things still could get interesting!