Problems continue to mount in D Block

Under the best of circumstances, a public-private partnership can be precarious, because balancing the oft-conflicting interests of the public and private sectors is difficult. In the case of the proposed public-private deal in the 700 MHz D Block, the circumstances are far from ideal and seem to be getting worse by the moment, putting the future of the current proposal into limbo.

To make the current plan work, there needs to be cooperation from a commercial D Block partner (more likely “partners,” given the regional option now on the table), the public-safety broadband licensee and the FCC, the regulatory body charged with supervising the deal. And, of course, money is needed to finance the entire thing.

A year ago, the pieces seemed to be in place. Frontline Wireless was very public about its intention to bid, and many expected large incumbents like AT&T and Verizon Wireless to participate, as well, if only to prevent a new nationwide entrant into the marketplace. In remarkably quick actions, the FCC set rules and public safety provided a united front behind the Public Safety Spectrum Trust (PSST), which became the licensee for public safety’s 10 MHz of broadband spectrum.

Of course, the auction failed to attract a qualified bid, as Frontline Wireless pulled out three weeks before the start. Commercial representatives said the FCC rules and PSST guidelines were weighted too heavily toward public safety and too vague to justify the investment of tens of billions of dollars.

Now, the FCC is trying to revamp its D Block rules, proposing a package that should be much more attractive to commercial entities. However, the lowered network buildout expectations have left a sour taste in the mouths of public safety, and some of the largest cities in the nation—New York, Cook County (home of Chicago), San Francisco, and Seattle, to name a few—vow that their first responders would not use such a network. Without them, is this an interoperability solution?

The PSST has its own issues. The FCC proposal would require the organization to shake up its leadership and limit its funding source to $5 million annually from the commercial partner, if one is found. Meanwhile, the money from what was supposed to be a short-term loan from adviser Cyren Call Communications—a source of controversy throughout this saga—is running out.

In a filing with the FCC this week, Cyren Call stated it is willing to pursue more financing for the PSST, but it wants assurances that it will be repaid for its original $4 million loan to the organization relatively quickly before taking such action. Without such an assurance, Cyren Call would have to terminate its relationship with the PSST “with the greatest reluctance,” according to the filing. Can the PSST prepare appropriately for network-sharing negotiations with the commercial partners under such circumstances?

Also, the FCC is in flux. With the election of a new Democratic president, the partisan party controlling the FCC will change. Remember, it was Democratic Commissioner Michael Copps that expressed the greatest reservations about the FCC’s latest D Block proposal when it was unanimously approved several weeks ago. Will Democrats want to reconsider this issue when they hold the majority at the FCC?

Finally, the elephant in the room is the financial markets. By any measure, this is an unproven, very expensive proposition. Are financial markets going to be willing to lend tens of billions of dollars to commercial entities at a time when capital markets are very tight and the long-term economy is difficult to predict?

Alone, any of these issues would make it difficult for the FCC to reach a consensus decision before the end of the year, which is the goal of FCC Chairman Kevin Martin. When considered together, this already daunting task has become even tougher.

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