Tales of the Sausage Factory

Chutzpah, Thy Name Is Wireless Incumbent.

So here we are in the middle of the most intensely competitive auction ever. As you can tell looking at the recent postings by fellow Wetmachiner Greg Rose this auction has dramatically pushed up the amount of money paid by bidders for licenses and has created more intense competition for a broader group of licenses than previous auctions, strongly suggesting that — as Greg and I predicted when we first started pushing anonymous bidding in March 2006 — anonymous bidding eliminates all kinds of targeting, collusion and retaliation that typically held back smaller bidders and allowed larger bidders to pick up licenses for a song. An utter smashing success (at least from the perspective of those who favor using auctions for distribution of licenses), right? Who could have a bad word to say about it?

Answer: All the people who hate anonymous bidding BECAUSE it eliminates the ability to signal, retaliate, and collude and thus makes the auction more competitive. i.e. The incumbent wireless licensees (other than Verizon, which wanted anonymous bidding to avoid being targeted).

More below . . . .

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Tales of the Sausage Factory

700 MHz PreGame Show: Reading the Tea Leaves on Verizon and AT&T's Last Moves

Well the short forms are in, and a surprising number of companies are keeping mum about whether they even filed or not. But a few more interesting tidbits have turned up — notably that Echostar will come to the ball without its dance partner from the AWS auction, fellow satellite TV provider DIRECTV. And Clearwire, an anticipated participant, will sit this one out.

But of course, all eyes turn to the expected big boys of the auction, the largest incumbents, the returning champions, those winners of wireless, the masters of mobility, AT&T and Verizon! These are the guys to beat, the multi-billion wireless guerrillas that should be unstoppable and able to dictate to the market whatever they want. With the cable guys eliminated, they should be on easy street. But with Google making its play, and Frontline getting a 25% “designated entity” discount if it bids on D Block, even the mighty incumbents need to tread warily and brace for battle, lest they end up playing the French to Google’s Henry V at the spectrum equivalent of Agincourt.

With the necessary paperwork in to the FCC on December 3 triggering the anti-collusion rules and ending the last chance to say or do anything related to the auction, every last minute twitch and adjustment of the incumbent will be under intense scrutiny. Professional prognosticators, armchair analysts, and even random bloggers like yr hmbl obdn’t will try to read the tea leaves and predict the outcome of the upcomming spectrum steel cage smackdown.

So with this in mind, it is interesting to note the unusual a last minute wireless asset swap between AT&T and Verizon. Traditionally, wireless carriers have avoided these sort of mutually beneficial deals, preferring to duke it out directly with rivals. But AT&T Wireless and Verizon Wireless are now fully assimilated into the ILEC Borg Collective. Is this last minute swap a sign that the major wireless players will act more like wireline incumbents and work to defend their common interests — such as resisting the intrusion of newcomers Google and Frontline? Or is it merely that there are so few players to whom the companies can divest these assets (in both cases, the swaps are for licenses the FCC ordered divested as conditions on acquisitions) profitably before the Dec 3 short form deadline that this trade was inevitable?

And what should we make of Verizon’s announcement it will embrace Google’s “android” open platform for wireless? Is it just another move by Verizon to adjust to the T. Googlii lifestyle needs and turn a challenge to its business model into an opportunity to make huge profits? Or is this a final effort by Verizon to ward off my Apocalyptic Google Prophecy by persuading Google it doesn’t need to win licenses to get what it wants?

Finally, there is Verizon’s Petition for Reconsideration asking the FCC to reverse its decision to allow Frontline to keep its “Designated Entity” bidding credit while still doing 100% wholesale, but only for D Block. Is this just yet-another-round of the non-stop sniping between Frontline and Verizon? A signal that Verizon is interested in D Block? Or even a possible feint to disguise it’s intention to go for C Block and leave D Block to others?

More below . . . .

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Tales of the Sausage Factory

The 700 MHz Auction Pre-Show: Live from the AT&T/Aloha Bowl!

The pre-game show for the 700 MHz auction has definitely gone into full swing. Lets ignore for the moment the purely regulatory shenanigans such as Verizon’s war of litigation and regulatory maneuver. Let’s pause for a moment to consider some of the player training and pre-game jockeying for position. Notably, today’s big announcement that AT&T will buy Aloha Partners 700 MHz licenses.

“Whoa!” I hear you cry. “How did Aloha Partners (or anyone else) get 700 MHz licenses? I thought the auction wasn’t until January!” Well, for reasons I will address below, the FCC actually auctioned some of these licenses back in 2002 and 2003. Aloha Partners won a fair number of them dirt cheap (since at the time no one knew if the broadcasters would ever finish the digital transition and get off the spectrum), and then began a steady stream of acquisitions, culminating in the purchase last month of Lin TV’s 700 MHz licenses, giving them a total of 270 licenses overall and healthy coverage in the major markets of the southwest, south, east coast, and portions of the midwest. (You can see and old map of the major coverage areas here.)

And now, in what has become the all too familiar paradigm for the telecom world, AT&T has turned around and swallowed Aloha Partners 700 MHz licenses. What does this mean? What impact for the auction? For other deals? Will this impact the regulatory end game?

My speculations are even wilder-ass than usual, given the utter lack of real data. But if you’re up for a walk through the entrails with me, see below . . . .

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My Thoughts Exactly

Welcome Boingers and Sundry Wetmachine Virgins!

Step right this way!

If you’re looking for what Cory Doctorow calls my “gonzo hacker novels”, you are almost there. Click on the images on the top left of this page.

The creator of the illustrations for The Pains, Matthew Frederick Davis Hemming, is selling prints of the illustrations. Check out his site too!

Speaking of Cory, check out the podcasts of his interview with me:

Part One
Part Two
Part Three

If you care about holding onto democracy and yer constitutional rights in today’s modern digital-futuristic world of today, check out Harold Feld’s Tales of the Sausage Factory. He’s written a lot of good stuff lately — on net neutrality, on the new FCC chairman, on collusion in FCC auctions, on municipal wireless & democracy. . . When Harold writes something it’s usually well written, informative, funny, and very important.

If you’re a software geek, check out Howard Stearns’ Inventing the Future. Howard is one of the lead developers on the Croquet project.

Speaking of cool web n+1 software, isn’t about time that you checked out OpenLaszlo?

In conclusion, let me beg for money. Please buy one of my books (or make a paypal donation as a token of value received for the free downloads).

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