Groups call for competitive spectrum auction

New broadband providers should be given a better chance of winning pieces of valuable wireless spectrum to be auctioned by early next year, several groups said Friday.

The groups, including Google, startup Frontline Wireless, and consumer advocate Public Knowledge, called on the U.S. Federal Communications Commission to change the way it auctions spectrum when it sells off 60Mhz of spectrum to be freed up when U.S. television stations move to all-digital broadcasts.

The auction of the coveted 700MHz band of spectrum -- which allows broadband-speed wireless signals to travel farther and penetrate buildings better than some other bands -- presents the best hope U.S. consumers have of a third major broadband service to challenge cable and DSL carriers, said Michael Calabrese, director of the Wireless Future Program at the New America Foundation, a think tank that hosted Friday's spectrum forum.

"If we do nothing -- if we take the [auction] rules we've used for the last 10 years, the same incumbents are going to win," added Harold Feld, senior vice president of the Media Access Project, an open media advocacy group. "There is no competition fairy. There is no magic that's going to happen that if we just deregulate enough, somehow a new competitor is going to emerge."

The groups at the spectrum auction forum didn't agree on all the details, but they suggested that the way the FCC has auctioned spectrum in the recent past has favored large incumbent telecom carriers. The FCC is expected to set the rules and conditions for the auction of the 700MHz band of spectrum in the coming weeks.

The groups called on the FCC to require that the winners of a chunk of the spectrum allow "open access" -- sell access to competitors on a wholesale basis. The open access requirement would allow a nearly unlimited number of competitors to offer wireless broadband services, said Gigi Sohn, president of Public Knowledge.

The groups also want the FCC to conduct anonymous auctions -- where bidders wouldn't know whom they're bidding against. In the past, large wireless carriers have used transparent auctions to drive up prices on chunks of spectrum being bid on by small competitors, said Gregory Rose, an econometrician and game theorist working with open access proponents. In many cases, many larger carriers then dropped their bids after the smaller carriers were eliminated, he said.

Some carriers have also engaged in retaliatory bidding against other companies that bid on spectrum they were interested in, he said. The retaliating bidder will bid on spectrum the second company is interested in, "as a signal to say, 'back off on the license I want, or I will drive the price of the license you want through the roof,'" Rose said.

Verizon and AT&T, two large broadband and wireless carriers, have declined to comment on the upcoming auctions.

But some free-market think tanks and carrier trade groups have been vocal in opposing open access requirements for the spectrum auctions.

Scott Cleland, chairman of advocacy group NetCompetition.org, questioned Frontline Wireless' open access goals in a blog post Thursday. Frontline "wants the FCC to auction spectrum to them requiring ... open access -- so effectively no company will be able/or want to pay much for the 700 MHz spectrum -- and so Frontline Wireless could capture this most valuable spectrum available at the market-managed price of pennies on the dollar," he wrote.

But Frontline chairwoman Janice Obuchowski, speaking at Friday's forum, noted that the two largest wireless carriers are gobbling up market share, and without new auction rules, that will continue to happen after spectrum auctions. She called for the FCC to auction off the 700MHz spectrum in small chunks that smaller companies can afford, breaking with Google's call for larger blocks to be auctioned.

The goal of the auction should be for "true, robust competition" to emerge, she said.