FCC Puts 4.6 Billion Minimum Bid on Spectrum Auction

ChainedFei writes "Wired News notes that the Spectrum auction is moving forward, with the FCC placing a minimum bid for the C-block spectrum being offered at $4.6 billion. That, coincidentally, was the amount that Google fronted as a minimum bid to endorse certain open standards for the spectrum being sold. This is essentially a move to shut out smaller possible competitors while also maximizing the money the auction will generate for the grade-A areas of the spectrum. In addition, any single bidder wishing to purchase the entirety of the spectrum must front a minimum of $10 billion. 'According to the FCC, nearly all of that C block aggregate reserve price will go toward a package of U.S. national licenses. This portion of the spectrum also happens to be the one with two open access conditions attached to its sale mandating that all devices be allowed to access the band and that all applications can be able to run across the network. If the reserve price isn't met, the auction will be rerun without these two conditions in place, according to the FCC.'"

Bad Move

[JaredOfEuropa]

This reminds me of the auction for UMTS licenses that were held in the Netherlands a few years ago. This was back in the mad days when investors and corporations paid silly prices for cable and telco companies. UMTS was the next big thing, and companies were eager to bid for the licenses. So, politicians ended up congratulating each other on how much money they raked in for the public coffers... and companies suddenly found themselves so strapped for cash that they no longer had the money to invest in the expensive rollout of UMTS itself, or even for interim technologies such as EDGE. We were stuck in the stone age with GPRS, and when UMTS finally appeared on the market, it was years late, with lousy coverage, and the plans were horribly expensive (at first it wasn't even available to consumers; only to corporate subscribers). The auctions set back the development of our telco infrastructure by years.

People in favour of these auctions seem to forget that companies are not in it for charity, and investors like to see a reasonable return on the money they put in. The cash for these licenses have to come from someone, and that someone is you, the dumbass consumer.

Re:Great

[dattaway]

Considering the head of the FCC is a former AT&T lobbying professional, AT&T wrote it for them at no charge!

Re:Bad Move

[Yer Mum]

The same also happened in the UK.

In European countries where they held a 'beauty contest' (operators bid less money but also had to promise to roll out services and coverage) the result was decent services from the start at cheap price for the end consumer. E.g. Norway.

Re:Backwards

[WPIDalamar]

Problem is, it's sold in chunks. So an incumbent wireless provider can buy a single region and completely prevent any other player from having a national wireless network.

Re:Backwards

[ohmypolarbear]

If they can't get 4.6B for the spectrum, they'll remove the two open access restrictions? WTF?

I agree, WTF - but not for the same reason:

It should be the other way around... if they can't get 4.6B for the spectrum, then they'll ADD the two open-access restrictions that they didn't include. Then at least, they know Google would bid 4.6B and maximize their profits while also having a more open network.

I think the bigger problem is the money vs. principles problem on display. With only two of the four restrictions in place, Google won't bid on it, and everyone else will just sit tight until the restrictions go away. At which point the bidding may go far above $4.6B. The regulators can go back and say "we tried this newfangled open access thing and it just didn't work," the FCC is guaranteed their pile of money, and the incumbents maintain their entrenched business models.

If the FCC were really committed to trying the open model, they'd do something different - if there are no bidders with just two restrictions, then either do what you suggest and go to Google's four so someone will try it, or don't sell and just open it up completely. Something that will let us see how such a system could work. If Google or common ownership succeeds, great; if it fails then at least we have some data to look at and decide whether open access is actually a bad idea or just needs some tweaking.