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House Committee Grills FCC Over Wireless Auction

Failure to sell spectrum for public safety network criticized

By Martin H. Bosworth
ConsumerAffairs.com

April 16, 2008 

The block of spectrum allocated for the creation of a wireless first-responders network, referred to as the "D block," received a sole bid of $472 million, not sufficient to win the auction.

Committee chairman Ed Markey (D-MA) said that while he was disappointed in the failure of the D block auction, "I believe that pursuing ways for public safety entities and the private sector to partner toward achieving a network that possesses nationwide interoperability and broadband capability remains our best option going-forward on the D-block."

FCC commissioner Michael Copps agreed. "I would rather have no network built — and let public safety go back to the drawing board — than tie up first responders' spectrum in a network primarily or disproportionately dedicated to serving purely commercial interests," Copps said. "We simply cannot let this precious opportunity to serve public safety be derailed by those who may prefer to enrich private interests at the expense of the public well-being."

Copps said that the D-block spectrum could not simply be awarded to the bidder, and that the auction would have to be held again at a later date, with a clearer understanding of all the factors involved.

The winners of the spectrum auction, Verizon Wireless and AT&T, did not bid on the D-block spectrum, preferring to focus on the more lucrative "C-block" spectrum which could be used for commercial purposes.

FCC chair Kevin Martin defended the results of the auction. "The auction was the largest in FCC history, raising a record $19.6 billion in bids," Martin said. "Even in a difficult economic climate, revenues raised in this auction well exceeded Congressional estimates – nearly doubling the ten billion dollars Congress had anticipated would be raised."

Whitewash?

The Committee hearing also discussed the lack of companies bidding for the spectrum headed by women or minorities.

Markey referenced a recent report he commissioned by the Government Accountability Office (GAO) that found evidence that ownership of media companies by women and minorities was limited, and that data on the subject was inconclusive and hard to come by.

"Women-owned and minority-owned businesses did not break through. There is no new national competitor to provoke new broadband competition, innovation, and consumer choice coming out of the auction," Markey said.

"[T]he data shows that women-owned bidders failed to win any licenses, and minority-owned bidders won less than one percent of licenses (7 of 1,090 licenses, or .64%), despite the fact that women constitute over half the U.S. population and minorities around one-third of the U.S. population," Adelstein said. "It is unfortunate that we have again failed to counter the legacy of discrimination that has kept women and minorities from owning their fair share of the spectrum."

Wireless woes

Adelstein also noted that the auction failed to meet a goal of many consumer advocacy groups and supporters of "net neutrality" -- the opening of a "third pipe" wireless Internet network to compete with existing cable and telephone networks.

"This will be viewed in the long run as one of the greatest failings of this auction and of recent Commission policy," he said. "While the auction outcome represents progress for consumers in terms of new openness for devices and applications, we should have done more to promote open markets by adopting a wholesale model to attract vigorous competitive alternatives."

The "new openness" Adelstein referred to was the condition placed on the C-block auction spectrum that all devices and handsets should work on the spectrum, even if they came from different wireless companies.

Although all the bidders on the spectrum initially opposed the openness requirement, with Verizon Wireless briefly suing the FCC to prevent it, a surprise bid from Google raised the bidding price of the spectrum to $4.6 billion, triggered the requirement for the auction.

The FCC eventually passed compromise rules for the auction that mandated the use of all devices on any networks powered by the spectrum, but fell short of enabling the creation of true wireless broadband alternatives. Martin, in his testimony, said that even the more limited rules were a win for consumers.

"With open platform requirements on one-third of the spectrum, consumers will be able to use the wireless device of their choice and download whatever legal software or applications they choose," he said. "A network that is more open to devices and applications will help foster innovation on the edge of the network, and give consumers greater freedom to use the wireless devices and applications of their choice."

Fellow commissioner Copps disagreed. "What a huge force for innovation and openness in the wireless market this could have been — and I am very sorry that a majority of the Commission rejected the suggestion of high-tech innovators, public interest groups, Commissioner Adelstein and me to travel down that road."

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