As U.S. spectrum auction opens, questions linger

One of the major questions as the U.S. Federal Communications Commission kicks off a multibillion-dollar spectrum auction Thursday is whether the auction will produce a winning bidder that will challenge telecom and cable-based broadband providers with a national wireless broadband network.

Other questions will also be answered in coming weeks as the auctions, for 62MHz of long-range, high-speed spectrum, unfold. Will Google or another bidder buy enough spectrum to launch a "third pipe" broadband network? Will any bidders step forward and pledge to build a nationwide broadband and voice network for emergency response agencies?

The bids to watch in the 700MHz auctions are for the C block, a 22MHz band of spectrum broken up into 12 regional licenses, and the D block, 10MHz of auctioned spectrum paired with another 10MHz set aside for a combined national commercial/emergency response agency network. Startup Frontline Wireless, one of the primary backers of the public-private model for an emergency responder network, announced in December that it had ceased operations.

"The pull-out of Frontline leaves the whole D Block auction up in the air," analyst Jack Gold of J. Gold Associates said in an e-mail. "There is no way to know if a last-minute group will come on board. While the goal of establishing a universal network for public safety/security is a laudable goal, it is not the most lucrative area from a pure business perspective, so it is not clear how much demand there might be or who might step up to the plate to make this work."

The FCC may have made a mistake in adopting the plan by Frontline, a company with former FCC chairman Reed Hundt as its vice chairman, said Carlyn Taylor, a senior managing director in business consultancy FTI's corporate finance practice.

"I'm not sure how well [Frontline's plan] hung together from a financial standpoint," Taylor said. "I'm not sure anybody else is going to try to do what Frontline says they were going to do. There doesn't seem to be anybody else with a similar approach."

If any other company bids on the D block, it will be much less than the FCC would have received without the national public safety network build-out rules, Taylor said.

But the Public Safety Spectrum Trust (PSST), the nonprofit group of emergency response agency representatives that controls the public safety portion of the spectrum, said earlier this month it continues to support the FCC plan for the D block. The FCC should "do all that it can" to advance the public-private partnership meant to bring about the nationwide public safety broadband network, said Harlin McEwen, the PSST's chairman, in a statement. "While it would not be appropriate for the PSST to comment on any potential bidder’s strategy, we want to restate our enthusiasm for and commitment to what the FCC has done."