FCC: Issues Kept Bidders From 700 MHz Safety Spectrum

An agency report says fears of payments defaulting if negotiations failed as well as the costs of building out and operating the D block kept companies away.
In delving into why the D block public-safety spectrum failed to attract any serious bids in the FCC's recent 700 MHz auction, the FCC inspector general uncovered a series of reasons prospective bidders were scared off from bidding while clearing for-profit adviser Cyren Call of any influence in the bidding.

Inspector General Kent R. Nilsson said "uncertainties and risks associated" with deployment of the D block were the chief reasons serious bids didn't materialize for the D block, which has pubic-safety segments. Nilsson cited potential bidders' fears of payments defaulting if negotiations failed as well as the potential costs of building out and operating the network.

The Nilsson report, released late Friday, also pointed to the "negotiation framework with PSST (Public Safety Spectrum Trust Corporation)" as a potential factor in the auction.

"The scope of the investigation focused on Cyren Call's meetings with potential bidders and whether the information provided at these meetings affected potential bidders' involvement in the auction," the report states.

After the report was issued, Morgan O'Brien, chairman of Cyren Call Communications, said: "Regarding whether Cyren Call's statements to potential bidders deterred bidding in the D Block, the report said, 'This investigation has concluded that the lease payment estimates ... were informational in nature, were not made in bad faith and by themselves had no deleterious effect on the auction.' "

The inspector general's report said that Cyren Call officials had met with Frontline Wireless and Verizon Wireless officials to discuss an estimated spectrum lease payment of $50 million to $55 million a year for 10 years. The lease payment, the report stated, would have been included in the PSST business plan. Frontline was created to bid in the auction, but the company dropped out before the auction began.

Qualcomm, which bid $472 million for the D block spectrum, was the only bidder, but since the FCC had placed a reserve price of $1.3 billion on the spectrum, the bid was not taken seriously.

The auction raised nearly $20 billion and was dominated by the nation's two leading wireless service providers -- Verizon Wireless and AT&T. The FCC and congressional leaders have said they are interested in seeing the spectrum rebid or provided in some way for public-safety use. In the auction, the D block was envisioned as providing spectrum for both public safety and commercial use.