FCC airwave auction gets mixed results

After 261 rounds of bidding, a government auction of airwaves ended yesterday, raising almost $20 billion from companies hoping to build new broadband wireless networks for next-generation phones and other devices.

Congress expected $10 billion from the auction but was hoping for $15 billion when it directed the agency two years ago to sell airwaves that will be freed up next February, when the US transitions to digital-only television broadcasts. The airwaves are some of the most valuable the agency has auctioned because signals can travel significant distances on them, and go around trees or other obstructions.

It was a record haul but not a complete success for the FCC, which drew some criticism about conditions attached to some blocks of airwaves that might have resulted in lower revenue. One block to be shared with public-safety groups didn't sell and will have to be re-auctioned. Another block, which requires the winner to open its new network to devices or software supplied by any manufacturer, sold for little more than the minimum price.

A look at the winning bids suggests that the agency might have raised more money without those conditions. One block of airwaves, sold in small licenses, brought in a combined $9.1 billion, far more than the minimum $1.4 billion reserve price. The block of airwaves with open-access conditions sold for $4.75 billion, just slightly more than its $4.6 billion reserve.

Google's participation had raised hopes by some that it might win enough licenses to build a competitive national wireless network. However, it is unclear if Google won any airwaves, or if the company is contemplating its own network. The FCC hasn't released names of the winners, and identities may not be released for several days. Companies involved in the auction are barred from commenting on it for several weeks.

This auction could have a major impact on how consumers use wireless services. The FCC's decision requiring winners of one block of airwaves to offer open access -- allow consumers to use any phone or device -- has already prompted AT&T and Verizon to announce that they will allow outside phones on their existing networks. Google had persuaded the FCC to add that condition.

Still, the auction wasn't an unqualified success. One objective was to attract new competition, but AT&T, Verizon and other carriers are believed to have dominated the bidding. The block to be shared with public-safety groups attracted just one bid, and didn't sell.

Failure to sell the block leaves the FCC with several options, none particularly palatable. The FCC could get the highest value in the re-auction by eliminating the requirement that the airwaves be shared with police and firefighters. But that option isn't likely to play well in Congress. The agency could also slash the minimum price for the airwaves or jettison some of the conditions that require working with public-safety groups. (info from The Wall Street Journal)