Auction Aggravation

Operators miffed at delays though Spectrum's use is uncertain

To bid or not to bid. The recently postponed 700-megahertz wireless spectrum auction has confused wireless operators. They are unsure about the possible uses of the airwaves in this range, and broadcasters are using the spectrum for television channels.

A number of wireless operators have been hoping the auction might help solve the riddle of where they might find additional spectrum for third-generation data services. But there are so many unsettled issues with regard to the spectrum that they may never be able to use it, and the availability of advanced 3G wireless services may be even further off.

Verizon Communications asked for the delay so operators could study licenses they won in a different auction, ended in January, to determine what additional spectrum they might need. But Verizon and others are also con cerned about the oddities of the 700-MHz auction, now scheduled for September.

"The whole auction is flawed," said Elliott Hamilton, senior vice president at the Strategis Group. The spectrum is currently occupied by broadcasters that use the space for UHF television channels; they will be forced to vacate the frequencies in favor of digital transmission in the next several years. Wireless operators that want to bid on the spectrum can negotiate with the broadcasters in advance of the auction, giving the broadcasters incentives to move out of the spectrum sooner.

But even if operators win licenses and cut deals with broadcasters, its not clear what they can do with the spectrum. Wireless telecommunications services havent been operated in the band, so new equipment would have to be built. "Today the world is suffering from a fundamental shortage of engineers. Theres no way such an orphan technology as 700 MHz would be viable for an infrastructure vendor or more importantly a handset vendor," said Herschel Shosteck, president of Herschel Shosteck Associates, a major wireless consultancy. He said its absurd to believe that 3G broadband technology, designed for frequencies in the 2-Gigahertz range, could work in the 700-MHz spectrum.

But clearly some operators believe they can use the spectrum and are anxious for the auction to take place. The Rural Telecommunications Group (RTG) sent a scathing letter to the FCC opposing the auction delay. "If Verizon is unwilling or unable to devote the resources necessary to prepare to gorge on 700-MHz spectrum while digesting PCS [personal communications services] spectrum, another postponement should not be available to rescue it from its flawed eating habits," the letter reads.

The RTG accused the government of favoritism by delaying the auction further, noting that potential bidders may have rejected the recently completed PCS auction in favor of the 700-MHz auction.

Broadcasters are also anxious for the auction to start, presumably because they hope to require wireless operators to pay them to vacate the spectrum.

The plan is plain extortion, Shosteck said. In an unusual twist, last summer the FCC said wireless operators wouldnt have to include the 700-MHz spectrum in the current 45-MHz limit on the amount of spectrum they can own. Such an odd exception to the rule is an effort to encourage operators to invest in spectrum that may unusable, Shosteck said. "Put in this context, a Mafioso boss would cry at the brilliance of the extortion."