Six months after failing to attract a qualifying bid for the 10 MHz D Block in the 700 MHz band, FCC officials last month proposed multiple changes in rules governing the spectrum, which is expected to be combined with an adjacent 10 MHz of public-safety spectrum to form the foundation of a shared network.

FCC commissioners were scheduled to vote on a notice of proposed rulemaking for the D Block during a meeting on Sept. 25, after press deadline. However, FCC Chairman Kevin Martin and FCC Public Safety and Homeland Security Bureau Chief Derek Poarch unveiled many key components of the proposed rules earlier in September.

Potential bidders in the first D Block auction told federal officials that the auction failed because the rules attached to the spectrum made it economically unviable — most wireless operators were not in a financial position to bid on a nationwide license, particularly at the 99.3% population coverage requirement set by the FCC and the ill-defined hardening of network components desired by public safety.

To avoid a similar fate next year, Martin said the FCC plans to take a multitiered approach to the next D Block auction. While continuing to pursue a nationwide commercial partner, the FCC also would conduct two technology-based auctions — one for WiMAX and one for LTE — in which 58 regional licenses would be available.

“In effect … the commission would be conducting almost three auctions and comparing the bottom line of those three auctions,” Martin said during a conference call with reporters.

In choosing among the winners of these three simultaneous auctions, the FCC would focus on coverage, Martin said. As a result, the winning bidder of the nationwide license — which would require a reserve-price bid of $750 million under the new proposal, about $600 million less than in the first auction — would be chosen over regional-license winners, unless all 58 regional licenses for a particular technology received winning bids. In that case, the combination that earns the most money for the U.S. Treasury would be declared the winner, said Robert Kenny, spokesman for the FCC.

While FCC and public-safety officials have expressed a preference for a nationwide commercial partner, many industry observers believe the nationwide D Block license will not receive much interest from bidders again. If that's the case, the Public Safety Spectrum Trust (PSST) — the licensee for public safety's 10 MHz of nationwide spectrum — likely would have to negotiate a partnership agreement with multiple commercial operators.

“It would complicate things, that's for sure,” said John Powell, chairman of the interoperability committee for the National Public-Safety Telecommunications Council.

Regional licenses also would not guarantee nationwide coverage, as Martin said only 50% of the U.S. population needs to be served by the bidders for the auction to be deemed a success and licenses awarded. If this threshold is reached by bidders for both WiMAX and LTE, whichever technology provides the most coverage would be used for the network, he said.

Meanwhile, if regional licenses remain unclaimed within the winning technology, those licenses will be available for auction at a discounted rate — 50% less than the normal minimum bid for those regions, Kenny said.

“That does not guarantee that every license would get sold, but that would significantly reduce the opening bid for almost any region, and we would only do that after we had reached the point where we would actually be awarding licenses,” Martin said. “I think that [would] provide, to the maximum extent possible, the likelihood that we would actually get as much of the country covered.”

Poarch testified before Congress that the draft D Block proposal also would ease buildout requirements within the regions. Instead of deploying a network that would serve 99.3% of the population nationwide in 10 years, D Block winners would have 15 years to build a network that would cover 98% of the population in densely populated areas and 90% in rural areas.

In terms of network hardening, Poarch said a commercial partner would be required to harden no more than 35% of sites designated by public safety as “critical” with 48 hours of backup generator power and eight hours of backup battery power.

PSST Chairman Harlin McEwen said the impact of the backup-power rules is difficult to judge without knowing the details.

“It's not the percentage of sites that matters, it's where they are,” McEwen said, noting that adequate backup power for rural sites sometimes is more important to public safety because those areas typically do not have the benefit of coverage overlaps from nearby sites — something that often is available in densely populated areas.

McEwen also expressed concern with FCC statements that the PSST would not be allowed to seek more than $5 million in annual spectrum-lease fees from the commercial partner for using public safety's airwaves. PSST officials had hoped to seek yearly spectrum fees worth $12 million to $15 million, he said.

Mobile wireless consultant Andrew Seybold called the proposed multitiered auction approach “absurd,” expressing doubt that established U.S. carriers — most of which already have identified LTE as their 4G technology path — would be willing to bid under such circumstances.

“I think this is a slam dunk for the WiMAX community, and the LTE community won't touch it,” Seybold said. “I honestly believe someone has orchestrated a WiMAX coup.”

In particular, Seybold identified WiMAX provider Clearwire — led by wireless pioneer Craig McCaw and majority-owned by Sprint — as a potential bidder, especially if WiMAX proponent Intel is willing to provide financial backing.

But such a scenario would not be good for public safety, Seybold said. A key feature of the public/private partnership was supposed to be public safety getting the chance to buy less expensive devices by leveraging the economies of scale in the commercial marketplace. If the shared network uses WiMAX, it would be the only major WiMAX network in the world operating at 700 MHz, so public safety would not reap the benefits of a larger global LTE market, he said.

“This is a disaster waiting to happen for public safety,” Seybold said. “If I were the PSST, I would give the FCC back my license, because it's not good for public safety. … Public safety loses.”

Some key changes in the FCC's D Block strategy.
First auction Reauction proposal*
License type Nationwide Nationwide or regional
Population coverage 99.3% nationwide 98% urban, 90% rural
Reserve price $1.3 billion $750 million
Technology Decided by vendor If regional licenses, either WiMAX or LTE
Buildout period 10 years 15 years
* FCC was scheduled to vote on notice of proposed rulemaking on Sept. 25.
Source: FCC