Tales of the Sausage Factory

Brief Cyren Call Update

Well, there is nothing new under the sun. Unsurprisingly, the few folks that did pick up on the Cyren Call story focused on the denial in bold type and completely ignored the stuff in the fine print. This by Richard Koman is typical.

OTOH, given that Cyren Call has been in a bunch to the FCC, I don’t think anyone important is fooled. Moving forward, the FCC will need to give some clear guidance on what it expects for PSST and its agents. As Morgan O’Brien observed, this will be a good thing.

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Tales of the Sausage Factory

So What Did Cyren Call Have To Say Now That The Curtain Is Lifted? Turns Out We Agree On A Lot.

Last night at 6 p.m., the anticollusion rules finally lifted and everyone in the universe started blabbing about the auction. Google confirmed that the conventional wisdom was right and I was wrong about their motives for bidding (ah well). AT&T and Verizon talked about their upcoming 4G Networks, and AT&T confirmed it places enormous value on its ability to squeeze monopsony rents out of its customers and vendors and therefore avoided the C Block. But most interesting, and not terribly well reported, was Morgan O’Brien’s response to the allegations around D Block, and subsequent interview with Jeff Silva at RCRWireless. While denying that Cyren call “killed” Frontline or “demanded” $50 million/yr for ten years, O’Brien does say that yes, a meeting took place, and yes, O’Brien asked for $50 million/yr as a lease payment in his opening negotiation positions.

One will pardon me for regarding this as a complete vindication of the story I broke back in January, thank you very much. I have always been careful to observe that I don’t think Morgan O’Brien meant to drive Frontline out of the auction or scare off other bidders, or even necessarily did anything wrong. But whatever O’Brien’s intent, it seems pretty clear that this was the straw that broke Frontline’s back and may have scared away other bidders as well (that still remains to be seen based on the FCC’s processes and investigations, and what turns up at the House Telecom Subcommittee Hearing on the 15th).

Critically, however, I agree with Morgan O’Brien’s bottom line. This should not be about finding a “fall guy” or assigning blame if it turns out no FCC rules were broken. What’s important is to figure out how to make the D Block public/private partnership work (or find some other productive solution for this spectrum). PSST will be an important part of that process going forward, and no one should imagine that I am suggesting otherwise.

More below . . . .

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Tales of the Sausage Factory

That's It! The 700 MHz Auction Is Ovah ! On to Tasting And Judgment . . . .

At long last, the FCC went three rounds without any new bids and declared Auction 73 (better known as Battle 700 MHz) closed. You can see the final provisional winning bids on the FCC’s Auction 73 page here.

Of course, we are all waiting to see who won what licenses, particularly C Block. But we have some preliminaries to go through first. Most importantly, the FCC has to make a decision on whether to sever the D Block from the Auction so that it can investigate what happened, especially the allegations around Cyren Call and Morgan O’Brien.

Even with the information available, Auction 73 has clearly succeeded on a number of key fronts. Unsurprisingly, I am inclined to credit anonymous bidding with the enormous surge in value for the licenses. Even if incumbents ended up walking away with the lion’s share of the licenses, at least they paid market value for a change (as opposed to the AWs auction, where they picked them up dirt cheap). I also note that at the end of the day, the FCC has only 8 unclaimed licenses (compared with 35 for AWS). As Greg Rose observed previously on his blog, there is good reason to believe we saw a lot of new people bidding.

It remains to be seen, however, whether the auction brought in new competitors or if, as the conventional wisdom predicted, AT&T and Verizon walked off with the big prizes. In particular, we all wait with baited breath on who won C Block.

Finally, two points on D Block. First, even if the experiment failed, that did not make it a dumb move. Babe Ruth used to lead the league in home runs and strike outs, because you can’t hit home runs unless you swing at a lot of pitches. With the FCC trying to satisfy the mandate of Congress to promote a national interoperable public safety network, but with insufficient spectrum allocated and with insufficient funds to build it. So the Commission tried to think outside the box and took a chance. turns out — for reasons still unknown — it did not work out.

Always punish innovators if things don’t go exactly right and you run out of innovators damn quick. Anonymous bidding was also an innovation. So is the open device condition. Before folks rush out to buy stink bombs to lob at Martin and the other Commissioners over D Block, consider if we want the next FCC reduced to such political timidity that we always get the same auction rules again and again and again, because the price of innovating is too high.

Second point: the FCC has a silver lining here. With the auction over, the FCC has fulfilled its statutory obligation to hold an auction commencing by January 28. Not only can the FCC take the time it needs to consider what to do, it can also consider other solutions besides trying to fix up D Block or even auctioning it off the highest bidder. That could include non-exclusive licenses, real time auctions, or even an unlicensed commons — if that would best serve the public interest.

I’m not saying what the best solution for D Block is, because we don’t know enough yet. It will depend on a lot of factors, such as who won the other licenses and how much stomach the FCC has to innovate. But I’m hoping that the FCC and others, when assessing Auction 73, will consider the successes as well as the D Block failure. Otherwise, they will vote to do the politically safest thing. Not a result I’d like to see.

stay tuned . . . .

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Econoklastic

And Now for D Block

It’s apparent to anyone who has been following the 700 MHz auction that the plan to allocate spectrum for a nationwide public safety network which would allow a private company to deploy the infrastructure and sell access to the network to private users, who could be preempted by public safety users in an emergency, isn’t going to happen. D Block has miserably failed to reach its reserve price for a number of reasons, not the least of which was the apparent bullying of Frontline by the Public Safety Spectrum Trust’s agent Morgan O’Brien which led to Frontline’s withdrawal from the auction.

Fellow Wetmachiner Harold Feld’s trenchant analysis lays out the options for D Block. I have a few things to say on the matter as well.

A national public safety broadband system is a vital national security interest of the United States. The notion of handing vital national security infrastructure over to private enterprise is one of the worst ideas the Bush administration has ever had. It hasn’t worked well in Iraq and it’s a non-starter for D Block. Let’s drive a stake through the heart of the idea that private providers can more efficiently deliver a vital public good than government can. The FCC should simply shelve the D Block proposal until the new Congress is elected.

The new Congress should definitively decide whether a national public safety network is, as the 911 Commission opined, a vital national security need. If so, it should appropriate the funds for the federal government to build and deploy the necessary infrastructure. It’s what Dwight Eisenhower did with the interstate highway system. The 700 MHz auction has already raised nearly twice the projected revenue. Either a national public safety is needed or it isn’t.

Such a federally-built public safety network offers an additional benefit. There is little additional marginal cost to building a network which allows capacity to be used by others while allowing public safety to preempt them during emergencies. Such capacity could be offered at cost to municipalities for community wireless broadband networks. The presence of such a government-owned network would force the major wireless broadband providers to cease redlining rural and inner-city America, closing the digital divide, as well as provide partial reimbursal to the Treasury for the costs of building the network. We would have our third broadband pipe, and it would be a joint federal-state-local asset.

If a national public safety broadband network is needed, we should do it right and the government should build it, or the Democrats and Republicans in Congress should publicly admit that there is no compelling national security need. And if it is built, it should be built with the benefit of all Americans in mind, not just the profits of the corporate greed machine.

Probably won’t happen, for all the reasons Harold cited. But it makes me nostalgic for a visionary like Dwight Eisenhower (and those are words I don’t often utter).

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Tales of the Sausage Factory

Stop the Auction! Congress and the FCC Must Investigate D Block Allegations Before Proceeding.

This is a reprint of a piece I just posted on the Public Knowledge Policy Blog.

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Tales of the Sausage Factory

Did Morgan OBrien and Cyren Call Kill Frontline?

I’m getting a number of folks from different walks of life coming forward with the same story: Morgan O’Brien was the direct cause of Frontline’s investors pulling out.

Of course, there is no way I can actually confirm this on the record because the people in the room either can’t talk about it (due to the anticollusion rules) or won’t. Nevertheless, having confirmed this with sources I find reliable and who could not have coordinated with each other, I feel I need to come forward here and put this on the table. D Block and the public safety partnership are far too important to end up falling victim to the combination of insider baseball, manipulation and greed that appears at play here.

I have absolutely not talked to anyone at the FCC about this. No one at the FCC can legally respond to any of this, and I would not ask them to do so. Similarly, in my discussions, I have been at pains to avoid any conflict with the anticollusion rules. Nevertheless, the sources I have are, I believe, reliable, and I have therefore made a decision to go forward with this story. I must also add that because I am on sabbatical, I have not had any discussions about this with my employer, Media Access Project, or with anyone at Media Access Project while developing this story.

Details below . . . .

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