Large block in 700MHz auction meets reserve price

A nationwide block of spectrum in the 700MHz band being auctioned by the U.S. Federal Communications Commission received a high bid exceeding the "reserve," or minimum, price of US$4.6 billion on Thursday morning.
A block of eight licenses covering the 22MHz C block of spectrum being sold by the FCC received a high bid of $4.7 billion in the 17th round of the 700MHz auctions, completed early Thursday. The C block is the portion of the 700MHz band on which the FCC will require open-access rules, meaning the winning bidder must allow outside devices such as mobile handsets from other carriers and must allow users to run outside applications on the network.

Some critics have complained that the open-access rules would suppress bidding on the C block, but Google has pledged to bid at least $4.6 billion on the C block. Bidding is anonymous during the 700MHz auctions, so it's impossible to tell which company has the high bid.

Through the 17th bidding round, high bids on the entire 62MHz of spectrum being auctioned totalled nearly $12.8 billion. The FCC and U.S. Congress had budgeted the auctions to raise at least $10 billion, but many observers had expected the auctions would raise much more than that.

One block of spectrum unlikely to reach the FCC's reserve price is the D block, a 10MHz band of spectrum that would be paired with another 10MHz assigned to public safety agencies. The FCC required that the winning bidder build a nationwide voice and data network to be shared between commercial users and public safety agencies such as police and fire departments.

After 17 auction rounds, the high bid for the D block stood at $472 million, far short of the $1.33 billion reserve price set by the FCC. That bid happened in the auction's first round on Jan. 24, and there's been no higher bids since then. If the reserve price is not met, the FCC would have to re-auction the D block.

Many members of the U.S. Congress pushed for a public safety network, after emergency responders couldn't communicate with each other during the 9/11 terrorists attacks and more recent disasters. Police and fire departments in neighboring cities often use different devices on different blocks of spectrum.

Critics have pointed to an FCC rule for the D block saying the winning bidder would have to give up millions of dollars in a deposit if it couldn't come to an agreement on network design with the Public Safety Spectrum Trust (PSST), which controls the public safety spectrum. Scott Cleland, founder of telecom analyst firm The Precursor Group, called that provision "onerous."

"That is not a negotiation," said Cleland, speaking at a 700MHz forum Wednesday. "Auctions are free markets, and people don't have to show up."

The FCC may have to re-auction the spectrum without the reserve price and perhaps without public safety obligations, said Michael Calabrese, director of the Spectrum Policy Program at think tank the New America Foundation. The PSST could use its block of spectrum to negotiate service with the auction winner if no build-out rules are in place, he said.

A PSST spokesman wasn't immediately available for comment on the bidding.