The FCC 700 MHz Spectrum AuctionIntro: In this podcast we discuss the in-progress FCC 700 MHz spectrum auction.Gordon:
Mike, you are the reigning Global Wireless Education Consortium
Educator of the year so you know about this stuff - what exactly is
this spectrum the FCC is auctioning and where did it come from?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.Gordon: What so interesting about this block of spectrum?Cell coverage, required cell-site density and cost (total network cost and cost per customer).I understand 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. Could you
describe those areas included in the 700 MHz auction using FCC definitions.Economic AreasBoth
the A-Block (12 MHz) and the E-Block (6 MHz) are being auctioned using
the Economic Area (BEA) service areas established by the Regional
Economic Analysis Division, Bureau of Economic Analysis, U.S.
Department of Commerce. Included are Guam and the Northern Mariana
Islands, Puerto Rico and the U.S. Virgin Islands, American Samoa and
the Gulf of Mexico. There are a total of 176 Economic Area service
areas designated by the FCC.BEA services include General
Wireless Communications Service (GWCS), Specialized Mobile Radio (SMR)
and Location and Monitoring Service (LMS). Cellular Market AreasThe
B-Block (12 MHz) is being auctioned using the Cellular Market Area
(CMA) service areas. The 734 CMAs are broken down as follows:
Areas 1-305: Created from the Metropolitan Statistical Areas (MSAs)
defined by the Office of Management and Budget (1-305) Area 306: The Gulf of MexicoAreas
307-734: Rural Service Areas (RSAs) established by the FCC which do not
cross state borders including parts of Puerto Rico not already in an
MSA (723-729), U.S. Virgin Islands (730-731), Guam (732), American Samoa (733), and Northern Mariana Islands (734).CMA Services include Cellular Radiotelephone Service and Interactive Video and Data Service (IVDS) Regional Economic Areas

The
C-Block (22 MHz) is being auctioned using the 12 Regional Economic
Areas (REAs) created by the FCC. The REAs are an aggregation of the 52
Major Economic Areas (MEAs) defined by the FCC.

REA Services include Wireless Communications Service (WCS)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 is the auction being conducted?






On their website, the Federal Communications Commission has  a public notice titled Auction of 700 MHZ Band Licenses. This document describes the bidding procedure for the 214 companies that have qualified for the auction, which will be handled by the Wireless Telecommunications Bureau
(WTB). The WTB is one of seven FCC Bureaus and is responsible for all
FCC domestic wireless telecommunications programs and policies.Here's a summary outline of the procedure pulled from the 12 page FCC document:

Bidding in Auction 73 started on Thursday, January 24, 2008.Each qualified bidder received prior to January 24: At least two RSA SecurID tokens An Integrated Spectrum Auction System (ISAS) Bidder's Guide A FCC Auction Bidder Line phone number

The
FCC will conduct the auction over the Internet and telephonic bidding
will also be available. In either case, each authorized bidder must
have his or her own SecurID token.

There will be a
minimum opening bid amount for each license and package and the minimum
opening bid amount is subject to reduction at the discretion of the WTB. The WTB will not entertain requests to lower minimum opening bid amounts. The WTB has established the following block-specific aggregate reserve prices for Auction 73:

Block A, $1.807380 billion;Block B, $1.374426 billion;Block C, $4.637854 billion;Block D, $1.330000 billion;Block E, $0.903690 billion.



Mike:
It's interesting the range of reserve prices - is it safe to say that
these correlate to the "value" the FCC sees with each?If, at the close of bidding in Auction 73, the aggregate reserve price for the A, B, C and/or E Blocks has not been met, the WTB will issue an announcement that bidding in Auction 73 is closed and set a date for commencement of Auction 76.

Round
results will be available approximately 10 minutes after the close of
each round. and two types of reports will be available to bidders: (a)
publicly available information, and (b) bidder-specific information
available only to that bidder when logged in to the FCC Auction System.

Each
qualified bidder will have a default watchlist that contains every
license and packages of licenses selected on the bidder's short-form
application. Qualified bidders may also create custom watchlists.

On Tuesday, January 22, the WTB conducted a mock auction, which will allow qualified bidders to
familiarize themselves with the FCC Auction System. Only qualified
bidders will be permitted to participate in the mock auction.

Once
winning bids are announced (either after Auction 73 or Auction 76) and
winning bidders are announced, winning bidders will have 10 business
days to file a long-form application (FCC Form 601) and make down
payments for all of the licenses it won.

Mike: Who are some of the major bidders? USA Today has published an interesting article titled Google could cause a stir in FCC's airwaves auction and, in the article, some of the leading bidders and their likely strategies are listed.Let's take a quick look at some of the major bidders (in alphabetical order) and their expected bidding strategies. For additional detail be sure to read the USA Today Article.AT&T AT&T
already has more spectrum than any other carrier so bidding on the 700
MHz band will be used for further build-out. Many experts are
speculating AT&T will focus primarily on the D-Block public-safety
spectrum.Mike: Why is AT&T going after public-safety spectrum? Am I missing something?Cablevision, Cox, Advance/Newhouse, BresnanThese
cable companies are interested in spectrum to provide wireless services
and compete with the large providers. Most experts believe they will be
bidding on A-Block regional licenses in their service areas.EchoStarEchoStar
is a satellite TV provider that is interested in using spectrum to
provide wireless broadband access to its customers. Most experts do not
feel EchoStar has the money to compete with companies like Google,
At&T and Verizon in the auction.GoogleGoogle
is the heavyweight here. The company wants to further expand into the
cellular smartphone market and has the money to compete with the big
providers. The company is expected to bid the $4.6 Billion minimum for
the C-Block spectrum.Mike: Is this National Spectrum? As opposed to regional?Leap, MetroPCS,, AlltelLike
the cable companies (Cablevision, Cox, etc), these regional wireless
companies will likely be bidding on A-Block regional licenses in their
service areas. Experts also are speculating Alltel will bid on the
public safety D-Block spectrum.Paul Allen and VulcanPaul
Allen's (co-founder of Microsoft with Bill Gates) investment company,
Vulcan, already owns spectrum in Washington and Oregon.Vulcan may be
bidding on some of the C-Block regional licenses or smaller A or
B-Block regional licenses.QualcommThe
California based wireless manufacturer is looking for spectrum for its
MediaFlo smartphone video service. Qualcomm will likely be bidding on
E-Block regional licenses.VerizonVerizon will likely be bidding big on C-Block spectrum with plans to open their network to any (hardware and software) devices.Mike: Can you give us some background on the auction to date?The 26th round finished yesterday (Friday - Feb. 1, 2008) afternoon - here's a quick update from the FCC auction site:

Bidding Rounds to Date: 26Bid totals to Date: $18,554,080,600The A and B-Blocks have been getting most of the attention lately:The Los Angeles A-Block leads the A's with a current bid of $580,268,000.The Chicago B-Block leads the B's with a current bid of $892,400,000.

There has not been a C-Block bid since it passed the FCC reserve price on Thursday. The current C-Block bid is $4,713,823,000.The public safety D-Block has not had a bid in 25 consecutive rounds and is stuck at $472,042,000, well below the $1.3 Billion reserve price set by the FCC.E-Block bidding has been slow with the New York City E-Block leading at $178,897,000.23 licenses had not registered a bid at the end of round 26, 19 of these 23 are in the E-Block.

Mike: Any personal observations and opinions on the auction?It looks (to me anyways) like the C-Block bidding may be done. Since the FCC reserve price of $4.6 Billion has been passed, the
open-access that Google wanted is assured. We won't know who the
winning bidders are until after the auctions have closed but I'd say
Google is the current leading C-Block bidder.Right
now it does not look like the D-Block will meet the $1.3 Billion
reserve price and will end up being re-auctioned by the FCC.A number of E-Block licenses will not meet minimum bids and will also be re-auctioned.The
FCC had set an original goal of $10 Billion for the auction. With
current bids totaling over $18 Billion, it appears the auction (from
the FCC's perspective) will be a success.

Bidding is closed for the weekend with round 27 starting Monday (Feb. 4, 2008) morning.Mike: What's the best way to stay updated?If you want to stay updated - the FCC Auction 73: 700 MHz Auction Summary page lists, among other things, results of the auction after each round. You can also watch my blog!Mike: When will we know the winners?The
auction will likely last a couple of months so we won't know the
winners until then. We should start to see products from the winning
bidders that use the spectrum sometime next year.

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