Financial markets cast cloud over proposed D Block rules

Yesterday, the FCC approved a draft of rules for the 700 MHz D Block and, remarkably, released the 200-plus-page proposal that commissioners hope will lead to a commercial entity partnering with public safety on a shared wireless broadband network that the first-responder community can use.

In this case, “hope” is the operative word, because none of the commissioners expressed much confidence that this set of rules will generate the outcome desired — a commercially built broadband network that public-safety entities will use for interoperable communications, particularly for data applications in the near term.

Many key aspects of the proposed rules had been released by the FCC before, including a multitiered auction that would allow for a nationwide license or regional licenses using either the LTE or mobile WiMAX standard. While the draft rules are more attractive to a potential commercial bidder, whether they strike the appropriate balance — serving public safety’s needs and allowing commercial partners to make enough money to justify their investments — will be debated throughout the FCC’s 40-day comment period on the item.

There are legitimate arguments on both sides. Some will say that the lowered technical specifications and buildout requirements make this proposed network no better to public safety than a typical commercial offering. Others will contend that even these lower standards are too burdensome for a commercial partner to realize the return necessary to satisfy shareholders.

But there are two things everyone can agree on. First, this kind of public/private partnership has never been done before. Second, the financial markets in the U.S. are terrible right now, necessitating a $700 billion bailout by the government.

Bad financial markets typically shy away from risky investments. And the proposed public/private partnership for the D Block almost certainly will be viewed as risky, if only because of its unprecedented nature and the high cost of building wireless networks.

“Finding money in the hallowed canyons of Wall Street — or anywhere else — to get this network built makes Indiana Jones’ searchings look like child’s play,” FCC Commissioner Michael Copps said.

With this in mind, Copps urged the commission to include as much detail as possible in its final reauction rules so bidders have the specifics necessary to convince the financial markets to back their endeavor.

That certainly would help. But the unfortunate truth is this: Even if the FCC has managed to thread the needle and developed rules that strike the perfect balance between public-safety needs and commercial opportunity, there’s still a reasonable chance that the agency would not receive qualifying bids on the D Block.

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