Infrastructure
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1/30/2008
06:44 PM
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FCC's 700 MHz Auction, Google's Open Network Plan Stalls

The dilemma with the C block for Google is that it wants an open wireless infrastructure, but it doesn't necessarily want to operate a wireless network.

Round 16 of the FCC's 700-MHz auction concluded Wednesday with bids blowing past the government's $10 billion minimum reserve figure, but with bidding for the nationwide C block suddenly languishing after days of heated bidding. A total of $11.6 billion has been bid in the auction so far.

The bidders are anonymous at this point, but in analyzing the bidding to date, spectrum expert Joe Nordgaard said he believes AT&T has been buying large segments of A block and B block regional spectrum. Noting that AT&T had purchased a big chunk of C block spectrum for $2.5 billion from Aloha Partners before the auction, Nordgaard said he has told his clients that AT&T will be filling out its wireless infrastructure by buying B block segments as well as lesser amounts of A spectrum.

Nordgaard, who is managing director of wireless consultancy Spectral Advantage, said the former Aloha spectrum tends to bump up close to Qualcomm's MediaFlo and consumes power at a relatively high rate; the B and A segments help make the old Aloha spectrum more efficient.

What about Verizon and Google, the other two marquee bidders that qualified to participate in the auction, Nordgaard was asked.

"This is pure speculation," he said, adding that Google may have been bid up to the brink of the reserve in the nationwide C block auction. In order to trigger an open wireless infrastructure it so desperately seeks, Google may have to cast a bid of at least $4.6 billion to hit the reserve. The dilemma for Google is that it wants an open wireless infrastructure, but it doesn't necessarily want to operate a wireless network. The last bid for the nationwide C block was for $4.3 billion.

"Google may have to outbid itself to hit the reserve," said Nordgaard. "But this spectrum is unbelievably valuable. The physics of it make it a once in a 50-year event to be able to get spectrum this valuable at these prices."

The D block spectrum segment has been stuck at $472 million -- well below the $1.6 billion reserve set for it by the FCC, leading to speculation the FCC will have to re-bid it under revised conditions. David Spofford, president of the Telecom Expense Management Industry Association, has suggested that because the D block calls for dual public safety-commercial usage, potential bidders may be hesitant to bid for it; they may not comprehend how the two uses might conflict with each other and thus avoid bidding.

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