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3/19/2008
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The 700 MHz Auction Is Over: What's Next?

With the D block in limbo and the C block sold, speculation mounts as to how "open" future cell phone networks will become.

The 700 MHz auction is over, and, as the wireless world waits to learn the identities of the winning bidders, speculation is mounting about what the FCC, Congress, and the winning bidders will do about the spectrum licenses.

There were three main blocks of spectrum up for sale and each is expected to meet a separate fate. The D block, which remains in limbo because its sole bid did not meet the minimum reserve price set by the FCC, is likely to be reviewed by Congress and the FCC. Hopes for establishing a national public safety network around D block spectrum were dashed when bidding for the spectrum died out at $472 million in the early days of the auction in January.

Rep. Edward J. Markey, D-Mass., said he will examine in a public hearing whether "a need for a high reserve price continues to exist." The FCC had set a $1.3 billion reserve for the D block.

"The FCC could simply accept a lower bid based on the public interest," suggested Joe Nordgaard, managing director of wireless consultancy Spectral Analysis, in an interview Wednesday.

Following the conclusion of the auction, FCC Chairman Kevin Martin said that "the commission remains committed to ensuring that we work to solve public safety's interoperability challenges."

The C block and its neighboring A and B block spectrum regions attracted the most bidding. Nordgaard said his clients have told him that AT&T was a major bidder for regional licenses in the A and B blocks. "AT&T needs these licenses" to flesh out the 700-MHz licenses in the C block it bought before the auction for $2.5 billion from Aloha Partners, he said.

Bidding for the C block and the A, B, and E blocks was the most intense, easily surpassing their reserve prices. The Congressional Budget Office had estimated the auction would bring in between $10 billion and $15 billion, and the total tally of $19.6 billion bid underscored that the event was financially successful.

The C block quickly passed its reserve price and then halted at $4.74 billion, leading observers to speculate that Verizon Wireless had placed the winning bid, beating out Google and any other bidder in the process. The FCC has kept a tight veil of secrecy around the identity of bidders, which will be revealed at a later date.

The C block is the most interesting and promises to open up wireless communications to a new "open" era in which consumers will be able to use handset devices and software applications interchangeably on a portion of the C block. Google had campaigned for an open concept, and, after initial resistance from Verizon Wireless and AT&T, was successful in convincing the FCC to open up a portion of the C block spectrum.

What form will "openness" take in future cell phone networks?

While there are no precise answers yet, a new generation of "unlocked" phones that can be used interchangeably on AT&T and T-Mobile networks is already being introduced, and Google's Android Open Handset Alliance promises more openness and interchangeability.

The other two major cell phone service providers -- T-Mobile and Sprint -- did not bid in the auction.

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