Spectrum Auction Process Disputed

The 700MHz spectrum auction ended March 18 after 50 days of bidding, taking in $19.6 billion for the federal government, even though the D block—reserved for emergency access by the government but in use daily by private industry—did not meet its reserve price and may be reauctioned at a later date.

Harold Feld, senior vice president of the Media Access Project, an advocacy group that promotes the public interest to the Federal Communications Commission, called the auction a success, particularly because of its use of anonymous bidding.

“When you compare the number of bidders that came to the table and the amount they were willing to bid with the Advanced Wireless Spectrum auction [in 2006] … it really worked as advertised in making the auction competitive,” Feld said. “So even if the incumbents walked away with most of the licenses, at least they had to pay market value for them instead of getting them for a song, which is what happened in the AWS auction.”

Critics have said the open conditions the FCC agreed upon for this auction—which will allow consumers to use their cell phones on any network as well as use any applications and content on their cell phones—may have limited the amount of money the auction took in.

Get more details here about the 700MHz auction.

The C block, the most coveted band of spectrum for potential nationwide service, earned $4.74 billion, which Feld said is an average of “75 cents per MHz pop.” The value of the spectrum licenses is measured in MHz per “pop” (population), the capacity of the license divided by the number of people in the area covered by the licenses. This is about the same amount that similar licenses were sold for in the AWS auction.

Feld dismissed the criticism.

“Licenses in C block are very big, and building out a network that covers the C block geographic area is expensive, much more expensive than the targeted B block licenses,” he said.

Even though the C block earned an average of 75 cents per population, Feld said the valuation “is somewhat misleading. The C block licenses covered a lot of territory people want, and it covered territory people don’t want. So we expect on a MHz-per-pop basis that a C block license isn’t going to necessarily get as much for targeted licenses for New York City or Los Angeles.”

Anonymous bidding does have its drawbacks. Because of it, the public will have to wait until the D block auction is resolved in order to learn who won which licenses. The auction is closed but cannot be concluded until the FCC decides the D block question. However, the winners may be disclosed if the FCC severs the D block from the auction. In addition, the winners are actually only provisional winners: The FCC won’t confirm their status until they finalize payment.

Until their status is certified, the FCC’s anti-collusion rules will stay in effect, and the winners will remain anonymous.