UPDATE: On reflection, I've decided to modify the tone of this considerably. After all, when someone basically agrees with you (the incumbents have too much market power), slapping them around for relying on the press is a pretty stupid and counterproductive move. Besides, my real frustration is with the press for offering up speculation as if it were fact, not Pryor for reading the press and getting upset about the supposed failure of the auction to produce a new competitor. So with apologies to Pryor for needless snark the first time around, here we go again.

Senator Mark Pryor (D-Ark) is upset with reports that AT&T or Verizon probably won C Block. More specifically, he is angry that we don't have more wireless competition. That's good. But he accusses Kevin Martin of fixing the 700 MHz auction to benefit the telcos. That's where he goes wrong, in my opinion. As I've said before, I don't think Martin rigged this for the telcos, especially in light of Verizon's persistent efforts to get the C Block conditions “clarified” away and Martin's telling them to go take a hike. Further, adoption of the anonymous bidding rules means that we don't know yet who won the licenses. We may very well be surprised when we see the results.

But if it turns out that, as predicted, the incumbents did win the lion's share of the licenses, that doesn't make the outcome Martin's fault. Rather, Senator Pryor should direct his anger where it belongs — at the statutory requirement for the FCC to auction licenses for use of the public airwaves. As I explain below, and as many of us explained before the auction, incumbents enjoy real advantages even under the best of conditions because they don't have additional costs new entrants have — like building the network from scratch or pulling customers away from a service they already use. To make matters worse, Senator Pryor's Republican colleagues are constantly haranguing the FCC to “not pick winners” and objecting to any kind of mechanism that could neutralize these incumbent advantages.

We can't have it both ways, and Congress makes the call. Either Congress eliminates auctions, or allows the FCC to exclude incumbents from the auction, or gives up on auctions as a way of generating competition and goes back to regulating market power directly. But blaming Kevin Martin and the FCC for the fact that incumbents keep winning auctions makes as much sense as blaming Bud Selig for the fact that the Yankees and the Red Sox always make the playoffs and the Nationals haven't gotten to the World Series.

More below . . . . [Read More!]

With even Chairman Martin publically agreeing that D Block is unlikely to attract any new bids, the question logically arises — what now? Needless to say, folks have not been shy about voicing their suggestions — especially those who think we ought to focus on maximizing revenue. Instead, I have a novel suggestion. Why don't we actually investigate what the heck happened first?

More below . . . . [Read More!]

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 . . . . [Read More!]

Everyone remember how Clinton was dead after Iowa? Now who remembers two weeks ago, or even last week, when analysts wrote off the 700 MHz auction as doomed due to credit crunch? But, other than D Block's utter failure to move (and regular readers will know my opinion of why that happened), the auction has proven a success by every measure we can obtain so far. Sadly, however, the key measures are not yet in, and won't be until after the auction is over. Which is why, despite C Block exceeding it's reserve price, I caution folks that we are still at the equivalent of just after the New Hampshire primaries and that any speculation about the important points of the outcome remain unresolved.

Here's what we know for sure now:

1) The current take now stands at over $14 b. This not only exceeds the $10 b that the Congressional Budget Office (CBO) estimated, it will exceed the “wildly successful” 2006 AWS auction (which grossed about 13.9 b). A, B, and C blocks have all met their reserve prices, with the most contentious fighting in certain high value markets B block.

2) Because C Block has met its reserve price, it will not be reauctioned and the open device conditions will go into effect.

So the auction is clearly a success from Kevin Martin's perspective (again, with the exception of D Block, which is a special case). While those like Commissioner McDowell can argue that C block might have fetched more without conditions, $4.7 billion is nothing to sneeze at. And it is clear that the aggressive build out conditions did not scare bidders away from A and B block, so (assuming the FCC is serious about enforcement) we should see increased deployment of services into rural regions.

What we still don't know is whether the new auction rules gave new entrants a real chance to win spectrum, or (as the conventional wisdom had it) will incumbents Verizon and AT&T end up capturing the lion's share of the spectrum (albeit at higher prices, owing to the introduction of anonymous bidding). That we cannot know until after the anonymity lifts when the auction ends (which, if the FCC chooses to reauction D Block under the rules proposed for reauctioning the other blocks, might not be for several months yet). Much depends on the identity of the current C Block holder. Is it Google? Verizon? Some other deep pockets like AT&T or Echostar, or perhaps the mysterious Vavasi NexGen Inc.? And is C Block settled? If the package bidder in round 17 knocked off the previous high bidder, then the previous high bidder will need to respond fairly soon or it will start losing its eligibility (bidding chips) and no longer be able to challenge.

If it turns out the incumbents capture most of the spectrum, I will need to eat a huge plate of crow and tip my hat to Commissioner Adelstein and Publius at Obsidian Wings, both of whom fretted that only Verizon could win a huge block like C Block and that we would get more new entrants by slitting the spectrum up. OTOH, if the Great Google Prophecy comes true, I will become insufferably pleased with myself for at least a month.

But, rather than pull a Tweety Bird and start treating my own speculation in the absence of data as fact, I will simply say --

Stay tuned . . . .

Granted for me it would be Chanukah not Christmas, but I think a real kick ass wireless network with oodles of competition and nifty new gadgets would make such a good present for America for Christmas 2009. And, as the reports from the field on the piece of wireless spectrum the FCC opened up last June show us, the FCC can bring it to us by opening the broadcast “white spaces”.

Sascha Meinrath, a serious partner in crime in spectrum reform, has some data from the field on deployment of equipment in the 3.65 GHz band the FCC finally opened for real in June 2007. Now, a mere 6 month later, Sascha reports on wireless ISPs (WISPs) using this band in the field to deliver broadband. As Sascha writes:

WISPs have been leading the charge and people are reporting 15km non-line-of-sight (NLOS) connectivity with 3650-3700 MHz (operating at 10W) — which is a huge boost over 802.11. Meanwhile, capacity seems to be hovering around 15 MB per 7.5 MHz (or 20MB per 10MHz) — so 100MB connections over 15km without line of sight are quite feasible using this band. All in all, that's pretty impressive for first-generation equipment. The equipment vendor Aperto is claiming that their new equipment will get 20MB per 7MHz (so you can see the development curve is already fairly steep).

To give you a feel for the real-world implications, folks testing things out reported, “6mb/s indoor at 2 miles NLOS. The base station was a 1 sector install using diversity at approximately 50ft up on tower using 120 degree sectors” — try to get that with an 802.11 access point.

Allow me to draw a few policy implications from this. The lead time from settling the rules to actual deployment of services took six months. By contrast, we have not yet seen any significant deployment in the AWS spectrum auctioned 18 months ago. Yes, some of that was due to the delay of some government licensees in migration. But much also has to do with the nature of licensed v. unlicensed networks. Licensed networks require huge investment of time, resources, standardization of equipment, etc., etc. By contrast, unlicensed networking equipment can be built, certified and deployed effectively relatively quickly.

Policy makers should take note of this in the debate over the broadcast white spaces, aka the vacant channels on the broadcast dial. Broadcasters and some large carriers (like Sprint and T-Mobile) want to see the white spaces licensed rather than opened to unlicensed use. The current broadcast spectrum auction will not begin to bear broadband fruit until 2010 or 2011 at the earliest. And if the FCC were to decide to license the white spaces, we could expect similar lengthy delays while the FCC devised auction rules, held an auction, then waited for the winners to (hopefully) deploy something useful.

Given the continued laggard pace of our national broadband, shouldn't the FCC learn from its success in the 3.65 GHz band? Licensed and unlicensed networks complement each other, each offering different capabilities. We have taken the first steps toward building the licensed wireless networks in the broadcast spectrum. Why not unleash unlicensed in the white spaces? If the FCC approved rules now, it would practically guarantee that devices could be certified and deployed as soon as we completed the digital transition. Indeed, given the backing of the broadcast white spaces by so many different developers, as compared to the relatively modest backing for 3.65 GHz, the probability of seeing a plethora of wireless networking devices and consumer products available to Americans by Christmas season 2009 rises to almost a certainty. By contrast, we will be lucky if the winners of the 700 MHz licenses will have broken ground on their first towers by then.

Doesn't America deserve a kick ass wireless network for Christmas 2009? I think so. And if the FCC applies the lesson of its 3.65 GHz success to the broadcast white spaces, we can have one.

Stay tuned . . . .

You can read a far more brilliant analysis by Greg Rose on why the punditry on the trickle of data from the 700 MHz auction is all wrong here. Briefly, Greg maintains that this slow convergence on the reserve price over several weeks of bidding is what to expect from a serious auction, and that the failure of parties to bid heavily on C or D Block in the early rounds with so much activity going on in the smaller blocks is a sign of a strong auction to come. Little players on the side are active for the specific licenses that they want, while the large bidders slowly stalk each other up to the reserve price on the major block.

For me, having stacked much on the Great Google Prophecy, I will cheerfully admit to being too close to things to judge objectively. But here are two tidbits of food for thought.

1) Google CEO Eric Schmidt made the evolution of the wireless net a centerpiece of his speech at Davos. How likely is it that Google CEO would hype the importance of wireless if they were not planing to win licenses?

2) Most analysts predicted Google would come in, bid the reserve price for C Block, and leave. They haven't. So far, no one has bid the reserve price for C Block. Instead, the price has crept up gradually. Now it could be that Google will only bid high if it must, for fear of getting stuck with licenses it doesn't want. But if that is the case, why show up at all? “To save face with the FCC?” Yes, but we will know after the auction when the identities of bidders and round by round information is revealed if Google never bid. So the “save face” excuse doesn't really hold water. Rather, it seems likely that they are bidding like everyone else, i.e., like bidders that want to win.

Straws in the wind, perhaps. But no worse than the straws of data everyone else is trying to spin into gold.

Stay tuned . . . .

This is a reprint of a piece I just posted on the Public Knowledge Policy Blog. [Read More!]

Apparently, I'm not the only one hearing this. Cory Boles of Dow Jones has this longer story and more detailed story (he being an actual reporter and all).

Stay tuned . . . .

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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After so much pre-game hype, it's hard to believe we have actually gotten down to the 700 MHz Auction week. The fun and games will start January 24, although we won't know (much) about the auction until it is all over sometime in late February or early March.

Not surprisingly, the news that Frontline Wireless , the company that did so much to shape the rulemaking around the “D Block” public/private partnership, went belly up before the auction even started has triggered a round of hand-wringing about the fate of D Block and finger-wagging by those who always thought it was a bad idea to impose any kind of conditions on licenses. As a result, we see a slew of stories questioning whether anyone will bid for D Block (or, at least, meet it's $1.3 billion reserve price), with some spillover questioning about the future of the auction itself.

While I agree with GigaOm that wireless auctions aren't for wimps, I do think the panic over Frontline's failure to scrounge up capital to make the necessary up front payment (the “ante” required to buy “bidding credits” to participate in the auction) is exaggerated. Nor am I as pessimistic that the auction will produce some groundbreaking changes as others, although it could well happen that we get through this auction with no new “disruptive third-pipe providers.” I think we will certainly see the auction hit the $10 billion Congress estimated (and the FCC set as aggreagte reserve price), and we will see C Block meet its $4.6 billion reserve price.

On the other hand, if things start to go poorly in the auction, we may see some panic moves by the FCC, particularly with regard to D Block. The possibility that the FCC may retroactively drop the reserve price on D Block (possibly without holding a reauction) may introduce strategic behavior into the auction. Of course, since no one (including the FCC) can actually talk about this possibility makes the speculation even more insubstantial than usual. Still, since the possibility does exist, and because I think such a course would create real problems with the auction, I briefly discuss it below.

Analysis below . . . . [Read More!]