Today’s first round of the 700 MHz spectrum auction featured a bid for the 10 MHz D Block, which is expected to be paired with public-safety spectrum in the band to provide the foundation for a nationwide wireless broadband network to be used for public safety.

In the first round, a $472 million bid was submitted for the nationwide D Block license, which would not be awarded unless the D Block winner reaches a network-sharing agreement with the Public Safety Spectrum Trust (PSST), which is the licensee for public safety’s 10 MHz broadband spectrum swath. Under the FCC’s anonymous bidding rules, the identity of bidders will not be revealed until the auction is finished.

Since the closure of Frontline Wireless—a startup that had expressed interest in the public-private partnership for a nationwide public-safety network—three weeks ago, many industry pundits questioned whether any entities would bid on the D Block spectrum. While the existence of a bid is good news for public safety, the $472 million offer was the minimum acceptable bid by the FCC, which has set a reserve price of $1.3 billion for the spectrum.

“In a way, it could be a signal to the FCC that there’s somebody interested in this, … but [the reserve price] is too high,” said Roger Entner, senior vice president of communications for IAG Research.

While the FCC is obligated to issue license rights to the top D Block bidder if the $1.3 billion reserve price is met, it is unclear whether the agency would accept a bid for the spectrum that does not meet the reserve price.

“Basically, the FCC can do whatever it wants to—it can retroactively change the rules,” Entner said.
Mobile wireless consultant Andrew Seybold said he also has been told that the FCC has the flexibility to accept less-than-reserve-price bids, if it chooses.

“I have two clients that are ancillary to the 700 MHz auction whose attorneys say that they way they read it is that the FCC has two choices: to pull the spectrum back or to let it go for the bid price,” Seybold said.
Indeed, the FCC’s July 31 order regarding the D Block does not appear to require the agency to summarily reject a high bid that does not meet the reserve price.

“If the D Block-specific aggregate reserve is not met, we conclude that we should leave open the possibility of re-offering the license on the same terms in a subsequent auction, as well as the possibility of re-evaluating all or some of the applicable license conditions,” the FCC order reads.

Seybold said he believes U.S. wireless giants AT&T Mobility and Verizon Wireless are both interested in bidding on the D Block but questioned whether either would be willing to bid the $1.3 billion reserve price when the nationwide network is expected to cost $15 billion to $20 billion to construct.

If the FCC were to accept a bid that is less than the reserve price, the matter could become the subject of litigation initiated by potential bidders that declined to participate because they believed the reserve price had to be met, Seybold said.

Entner agreed that a lawsuit could be filed under such circumstances but doubted the chances of such action being successful.

“You can certainly appeal to the courts, but the FCC has so much leeway—especially if it says, ‘We acted in the best interest of the American people,’” Entner said.

Overall, provisionally winning bids submitted during the first round of the auction totaled $2.425 billion, including a single bid of $1.037 billion for a package of the eight large licenses in the 22 MHz C Block, which is subject to rules requiring the licensee to use the spectrum for an open-access network. The aggregate reserve price for the C Block is $4.6 billion.

The second round of the auction will conclude at 4:30 p.m. EST today. The auction is expected to take several weeks.