Ethical Concerns Swirl Around D Block Spectrum Auction

A portion of the wireless spectrum, for which bidding closed March 18, failed to meet the government's reserve price.

Now, public interest groups and members of Congress are urging the FCC, which has imposed a gag order on participants, to lift its veil of secrecy over the identity of bidders.

The failure of the spectrum block, reserved for use by emergency transmissions and private-public partnerships, came as a surprise, especially given that industry observers had already picked out a front-runner for the auction.

Now, accusations have been levied that a consulting firm hired to help the government hand over the spectrum may have acted improperly and discouraged potential bidders by suggesting that any winning bid would have to pay $50 million in annual fees, in addition to the auction price.

The 700 MHz spectrum auction, which ended after 50 days of bidding, took in $19.6 billion for the federal government. However, only the A, B, and C blocks of spectrum were sold; the D block, which will eventually go toward a "public-private partnership" for both health and safety officials and private enterprise, did not make its $1.3 billion reserve price.

According to the FCC, "If the license for the D Block is not sold in Auction 73, the Commission may re-offer the D Block license…. Only qualified bidders from Auction 73 will be permitted to participate in [a related auction,] Auction 76." The highest offer for the D block was $472 million.

Harold Feld, vice president of the Media Access Project, a law firm that represents the public interest in all aspects of telecommunications, wrote on his personal blog in January—Feld was on sabbatical from MAP at the time—that Morgan O'Brien, chairman of Cyren Call, an advisor to the PSST (Public Safety Spectrum Trust), may have played a part in the auction's failure.

Half of the public-private partnership of the D-block does indeed go to the public, represented by PSST. Cyren Call is PSST's advisor in the auction, and therefore any private company who wins the license for the D-block will have to negotiate terms with Cyren Call.

In a telephone call, Feld referred to his blog, in which he had written that O'Brien insisted on a number of conditions. These conditions may have included, Feld said, "a fee of $50 million a year for ten years to have access to the public safety spectrum; that Morgan O'Brien would be the only conduit for the public safety community; that he would act on behalf of the D block whether to resell services."