04:37 PM

Web 2.0 Summit: AT&T's Stephenson Doesn't See Business Model For 700 MHz

The chief executive may still bid in the auction, but AT&T is unlikely to contest the most highly prized slice of airwaves up for sale, the so-called "C block."

Further roiling the waters in the upcoming wireless spectrum auction, AT&T CEO Randall Stephenson said Friday that his company has not discerned a viable business model for an open-access wireless broadband network over the frequencies.

"Is there a business model there?" asked Stephenson, speaking at the Web 2.0 Summit in San Francisco. "I'm not sure if there is or not."

AT&T had been expected to be one of the top bidders in the FCC auction of valuable 700-MHz spectrum being vacated by the television broadcasters, currently scheduled for Jan. 28 of next year. Earlier this month, AT&T spent $2.5 billion purchase to buy a swathe of privately held spectrum in the 700-MHz band from Aloha Partners.

When combined with Stephenson's comments, the purchase indicates that the renascent Ma Bell may still bid in the auction, but is unlikely to contest the most highly prized slice of airwaves up for sale, the so-called "C block."

"This makes it less likely AT&T will bid to win on the C block," says Gabriel Brown, chief analyst for wireless market research group Unstrung Insider (Unstrung Insider, like InformationWeek, is owned by CMP Media), "and makes it more likely to focus on the A and B blocks to complement this newly acquired 700-MHz footprint."

This summer, the FCC put out a set of regulations for the auction, including making the C block subject to "open-access" requirements. Whoever wins this band must open the network built on it to applications and devices from third-party providers. If AT&T uses its new spectrum, plus frequencies in the A and B blocks, its network will not be subject to the open-access requirements and it could erect a traditional, "closed" system.

"I'm not sure if we'll participate in [the C-block auction]," said Stephenson. "We'll definitely be in the auction."

Those regulations were at the heart of demands from potential insurgent bidders, including search giant Google and startup Frontline Wireless, co-founded by former FCC chairman Reed Hundt, to insure that the resulting networks are not controlled solely by the incumbent telecoms (i.e., AT&T and Verizon).

The open-access rules, and the expense of buying spectrum and building a network, will make it hard for anyone to make money on wireless broadband, Stephenson claimed Friday morning.

"It'll be interesting to see if somebody can go in and pay $4.5 billion for the spectrum, then build a network, then build OSS [operations support systems] and all the other systems," remarked Stephenson, "then turn that loose, can you make money at it? I don't know."

Reacting to news this week that cable company Comcast was blocking certain types of peer-to-peer traffic on its networks, Stephenson also reiterated AT&T's commitment to "net neutrality," saying, "We don't block anybody's content."

A vocal fan of Apple's wildly popular iPhone, which has brought AT&T thousands of new subscribers, Stephenson also acknowledged the dissatisfaction of many iPhone buyers with the relatively slow speeds of AT&T's EDGE network, on which the multimedia devices run. "I'm like you, I don't like the speed" of the EDGE system, he told Summit co-chair John Battelle.

Stephenson said that Apple CEO Steve Jobs demanded that the device run over the EDGE network, wanting ubiquitous coverage in the United States. And he indicated that iPhone connectivity speeds would improve as AT&T builds out its 3G cellular network.

"It'll get better as we upgrade our markets to 3G," Stephenson said. "We'll finish out most of them this year."

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