FCC Releases Rules for 700MHz Spectrum Auction

The FCC on Tuesday veered from its recent pro-big-business course when it approved rules that will, in part, foster innovation and bring new players to the broadband wireless market.

In their monthly meeting, commissioners laid out the requirements for the upcoming 700MHz spectrum auction. The bandwidth will open up in early 2009 as TV broadcasters move from analog to digital signals, although services wont be available until 2010 at the earliest. Companies including Google Inc., Verizon Communications Inc. and AT&T Inc. all want the 700MHz band for its 4G possibilities.

While no one, from commissioners to industry leaders, was completely pleased with the rules, the agency seemed to strike a balance between industry and consumer interests.

For example, the FCC voted to apply open access obligations on a third of the 700MHz spectrum.

This was a big deal for Google, which promised the FCC two weeks ago it would bid $4.6 billion in the auction if an open access condition were included. Commissioners on Tuesday said companies licensing the upper 700MHz band C Block of spectrum must let consumers use any legal device and application. The provision emulates the Carterfone decision of the late 1960s, when the government freed consumers from having to rent phones from Ma Bell.

AT&T and Verizon conceded to limited Carterfone constraints only after Google made its financial pledge.

Other rules included the construction of a nationwide, interoperable network for public safety use and a use it or lose it requirement.

Both Democratic and Republican commissioners praised the public safety initiative. A nonprofit organization will administer and oversee the spectrum, which will create the interoperability public safety agencies and lawmakers have clamored for since the Sept. 11, 2001, terrorist attacks and Hurricane Katrina. Democrat Michael Copps wanted publicly funded spectrum set aside for first responders, but, he acknowledged, such an undertaking would have been too expensive. The public-private model is the next best thing, he said.

If the first responder networks works, and thats a big if, the American people will be appreciably safer, Copps added.

The FCC further said commercial spectrum operators must abide by some build-out regulations or risk losing the licenses they win. Some licenses stipulate that holders cover at least 40 percent of the population of the applicable area within four years, and 75 percent of the population by the time the license ends. If that doesnt happen, the FCC can reduce the license terms or even pull the licenses and make them available to other providers.

There also were some notable omissions in the order.

Even though the agency bucked its trend of catering to powerful companies, it didnt wholly capitulate to other interests. To Googles and others chagrin, commissioners excluded a wholesale provider clause. Democrats said that leaves less room for a wireless competitor without wireline ties to enter the market. Jonathan Adelstein also said small providers felt let down because a wholesale model would have made it easier for them to compete.

Additionally, the agency stated that if spectrum doesnt sell the first time its hawked, the bandwidth will go back up for bid without Carterfone requirements.

Despite the different viewpoints, commissioners agreed the rules they passed will, at some point, lead to new devices and applications for consumers.

The entrepreneur or innovator who will make this happen is probably starting the eighth grade right now, said Republican Deborah Tate.

The July 31 vote comes after months of speculation over how the FCC would handle the spectrum auction.

Wireless association CTIA, which has been talking with the FCC about the spectrum rules, was happy with some of the results and remains concerned about others; it didnt specify those areas. The organization said the FCC was right not to impose wholesale rules or require geographic build-outs on all of the licenses. CTIA represents companies including Alltel, Verizon, U.S. Cellular.

Meanwhile, device maker Nokia CEO Olli-Pekka Kallasvuo praised the open access rule as a step towards meeting consumer demand and driving further innovation as mobility and the Internet converge.

And Scott Cleland, founder and president of telecom/tech consultancy Precursor LLC, said the open access model is untested and unproven. Even Google is unlikely to bid on it as it offers little opportunity to earn a return on the roughly $10 billion it would take to build and operate such a national network, Cleland said.

He added that Googles $4.6 billion promise now is moot since the search engine giant didnt get the wholesale and unbundling mandates it requested.

Google didnt immediately respond to the FCC vote, nor did AT&T or Verizon.

AT&T Inc.
Google Inc.
Precursor LLC
Verizon Communications Inc.

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