A Primer On The Coming FCC Auction

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Thanks to a number of recent news articles, most people should be aware of the upcoming auction of radio "spectrum" being held by the FCC in January. What everyone might not know is why this is going to be very important for anyone who uses a mobile device in the United States, and what the exact mechanics are.

What’s actually being auctioned? The answer is, licenses on the right to use certain radio frequencies. Specifically, a big block between 698 and 806 MHz, typically called the 700 MHz range for obvious reasons. This is a range that was formerly used for analog TV channels numbered 52 through 69. When over-the-air TV switches over to digital broadcasts in early 2009, these sections will no longer be needed, so the FCC is offering them for other use. Most of the interest centers on the potential for high-speed wireless Internet service, and to a lesser extent mobile phone service.

Why are these licenses so desirable? Simply put, it has to do with radio mechanics. As radio frequencies go down, they get more range and ability to penetrate obstructions like buildings and tree foliage for the same amount of energy put into the signal. The 700 MHz band is considered to be a nearly ideal combination of available bandwidth — about 10 megabits total for a single 5 MHz "block" — and range, which can be up to a hundred miles. A two-way connection would limit the range, but it’s still not inconceivable that there could be mobile connections at up to 30 miles, and fixed installs even farther out. This is compared to current cellular systems which tend to max out at between 5 and 15 miles, depending on conditions.

The most desirable set of licenses is the C group. This represents two blocks, each 11 MHz wide, which can be bought separately. Each of these blocks has a nationwide license — a company which buys one can deploy wireless coverage using it anywhere in the United States. To give an idea how valuable this is, Google has said it may be committing an opening bid of $4.6 billion dollars in order to try and capture these licenses. This is also the swath that Verizon wants to own.

The same nationwide licensing applies to the D group, which is two blocks of 5 MHz each. However, whatever companies buy the two D blocks will be required to help build and maintain a national public safety network as well. Due to this, and the smaller amount of space, the D blocks are less desired than the C group, and thus are considered to be the best chance of seeing a relatively unknown company get a national license.

Last but not least are the A, B, and E groups. Each of these is comprised of two blocks of 5 MHz, for a grand total of 30 MHz. However, they’re broken up into about a thousand regional licenses, meaning that they’ll be more affordable for small carriers, local players, or others who aren’t cash-rich to potentially grab. In theory, a company could also buy enough of these regional licenses to build a national or semi-national network as well. In theory, there’s enough radio spectrum up for grabs to build ten new nationwide networks, or four national networks and a dozen regionals. More likely, though, a significant amount of the available spectrum will be bought out by existing players to supplement their current offerings.

The last question is, who’s bidding? Well, nobody knows for sure until it happens, but Verizon is a safe bet, and Google may be as well. It’s likely that Sprint and some of the other mobile phone carriers will also at least test out the waters. Equally interested are some startup companies with big funding; satellite TV companies which may want the bandwidth for "triple play" services; and even possibly some real surprises like wired telecommunication companies looking to expand.

One thing to be sure of is that whoever comes out a winner in the auction, don’t expect them to just sit on their winnings. The terms of the sale require that companies build out networks using their purchases, with a minimum 35-40% coverage of the company’s licensed area after four years, and 70-75% after ten years.

 

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