FCC lowers bar for D Block “success”

It’s too early to be certain, but FCC Chairman Kevin Martin’s statements last week regarding an expected vote later this month on auction rules for the D Block sure smelled like a classic good-news/bad-news scenario for public-safety entities counting on the auction to deliver wireless broadband to first responders.

The good news: Martin outlined an auction strategy greatly enhances the likelihood that commercial wireless operators will bid on the 10 MHz of spectrum in a manner that the FCC will deem a success—a much-needed victory after no qualifying bids were placed on the D Block earlier this year.

The bad news: Under the new FCC proposal, a successful D Block could result in a wireless broadband network for public safety that fails to provide coverage in about 97% of the geographic area of the United States.

That’s because the new proposal requires only that 50% of the U.S. population be served by composite of regional operator for the FCC to declare the auction a success and award licenses to the high bidders in those regions that solicit offers. And, based on the latest census information, slightly more than 50% of the U.S. population live in the nation’s 40 most-populous metropolitan areas, which combine to cover about 3% of the United States’ land mass.

For public-safety officials hoping that a successful D Block auction would lead to a nationwide wireless network for first responders, such news probably is disappointing. But the fact that the FCC is expected to approve the plan at its Sept. 25 meeting is a reflection of the commission’s need to get this spectrum auctioned and have at least the beginning of a broadband network for public safety built.

Mind you, even under the previous rules—requiring 99.3% population coverage—critics noted that this would not have been a truly nationwide network, as vast areas west of the Mississippi River would not have been part of the coverage map. However, the new proposal could result in a coverage map that no longer blankets the continental U.S. east of the Mississippi.

In a press conference a week ago, Martin said the FCC would be conducting “almost three auctions” for the D Block simultaneously. One auction would present the spectrum as it was earlier this year, as a nationwide swath available for a minimum bid of $750 million, or almost half the reserve price for the D Block in the previous auction.

Of course, economics dictate that saving a few hundred million in upfront spectrum costs likely won’t be enough to offset the projected $20 billion needed to deploy a nationwide broadband wireless network. As a result, most industry observers doubt that there will be any nationwide bids, although the FCC and the Public Safety Spectrum Trust (PSST) both have expressed their preference for such a bidder.

Thankfully, the FCC has conceived of an alternate method to find a private partner. Concurrent with the nationwide D Block auction, there will be two auctions in which the spectrum will be divided into 58 regional licenses. To ensure technological uniformity across the network, bidders can submit their offers in either the WiMAX auction or the LTE auction.

If there is not a nationwide bidder, the FCC will award licenses and deem the auction a success if either of the technology-based regional auctions covers at least 50% of the U.S. population. If both the WiMAX auction and the LTE auction reach the 50% coverage threshold, the technology that provides more coverage will be declared the technology standard for the shared network—even if the consolidated bid amount for the other technology is greater.

As mentioned before, covering 50% of the population may not mean that a great deal of geographic area would have wireless broadband for public safety. However, this setup should be much more attractive to commercial carriers trying to sell the notion of participating in this unprecedented joint venture to potential investors at a time when the capital markets are tight, so there’s a legitimate chance that carriers might be enticed to cover more than 50%.

Meanwhile, after the initial auction is complete and either WiMAX or LTE is chosen as the network technology, the FCC is going to do something unique. If some regions are unclaimed, it will lower the reserve price on those regions by half and offer them again to bidders willing to provide coverage in the chosen technology.

Another item that should appeal to commercial carriers is that the buildout period would be extended from 10 years to 15 years. Other buildout details—such as hardening requirement for site—that will greatly impact the economic viability of the network are still to be decided.

Only time will tell whether this approach will allow the public-private partnership to strike that delicate balance of being economically viable for the commercial partner and fulfilling public safety’s needs. But Martin and the FCC deserve to be applauded for devising a multitiered approach to the auction that provides about as much flexibility as possible in an effort to attract commercial bidders.

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