Networking

Big winners in the airwave auction- Verizon and AT&T

In the auction of the airwaves, two big winners came out on top, leaving Google phone in the dust. Verizon and AT&T combined to account of $16 billion of the 19.6 billion bid in the spectrum being vacated by the shift to digital by television broadcasters.

In the auction of the airwaves, two big winners came out on top, leaving Google phone in the dust. Verizon and AT&T combined to account of $16 billion of the 19.6 billion bid in the spectrum being vacated by the shift to digital by television broadcasters. Only one new entrant to the field, Frontier Wireless LLC, won enough new licenses to create a nationwide footprint.

From the Associated Press:

Despite the dominance in the auction by the major cell providers, the FCC chairman was upbeat about the auction results.

"A bidder other than a nationwide incumbent won a license in every market," Kevin Martin said. As a result, there is the potential for a "wireless third-pipe" competitor to emerge in every market across the nation.

Broadband access is dominated by the major telecommunications and cable companies. Martin wants wireless to emerge as a third platform, creating competition.

But Ben Scott, policy director of Free Press, an advocacy group that supports greater access to communications services, said the auction failed in that regard because Verizon Communications Inc. already is a dominant provider of Internet access.

"The prospect of a genuine third pipe competitor in the wireless world is now slim to none," he said.

One of the big questions to arise out of the auction is what is meant by "open" in the so-called "C-block" airwaves. The FCC requires that these airwaves be open to any device. But the specifications around the C-block are vague at best. And there is currently no way to know what Verizon plans to do with the block.

While the hope was to see new players arise in the wireless space, the general sense is that the big players just got bigger.

From BusinessWeek:

While the auction failed to produce a new national competitor, FCC Chairman Kevin Martin called the outcome a success and says the government did all it could to facilitate such an entrant. Martin, in an interview with BusinessWeek, noted that 99 bidders other than the dominant national operators won 754 licenses, or nearly 70% of the 1,090 licenses sold in the auction. "Would I have liked to see a new entrant on a nationwide basis? Sure," Martin says. "But the auction will be used to create a third [high-speed Internet] pipe into people's homes. It won't be on a nationwide basis but it will be offered in each market."

But Public Knowledge, one of many public interest groups that lobbied for open access, said it was disheartened that the auction hadn't paved the way for new competitors as expected. "It is disappointing that new competitors and innovators won't have access to the spectrum to give consumers the benefits of real broadband competition," the group said in a statement.

The group also questioned whether Verizon, which purchased some of the spectrum with open-access requirements, will follow through on those principles. Arbogast echoes that sentiment: "My guess is they won't go as far as the public interest groups and applications providers want." Notably, just a day before the FCC auction results were disclosed, Verizon held a conference during which it revealed details of its open-access plans for the first time.

While the winners in this auction are clear, what isn't clear is the impact on cellular users. Google pledged heavily to insure that a desirable block would be open to its apps and ads, but subscribers are still bound by the instruments that the provider sells. Or are they? Verizon is claiming that it will allow any compatible handset access to its network but what that will look like remains to be seen. As a Verizon subscriber, I would certainly like to be able to swap my existing phone for an iPhone, currently pledged only to the AT&T market.

We'll have to wait until April 3rd or later to see what the final fallout will be. That is when the government's anti-collusion rules will lift, and the auction winners will be able to sell or trade what they have acquired.

The question to us as consumers is this: Do we care? Is there really a new impact for us, or are we the losers because no new player emerged to provide an alternative to DSL and cable? Will this outcome be more than just an interesting blip on the wireless radar?

More information:

Verizon, AT&T win big in airwave auction (Los Angeles Times)

Verizon's airwaves victory may prove risky, Goldman Sachs says (Bloomberg)

Auction takes ‘first step' to open-access-wireless (San Jose Mercury News)

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24 comments
dawgit
dawgit

The question that needs to be addressed isn't even asked in the general public. While it has come up in certain Academic circles, the general public hasn't got a clue as to what just happened to "Their" Air Waves. Some variation of the FCC has been around since the begining of "Radio". At that time it was the contention that the Air, Air Waves, and the Water were the property of the people of the United States. The Air Waves were to be governed, or controled for them (the people) by the Government to ensure a fair and free use for All. That certain Frequences, or Frequency Bands would be set aside for certain purposes. Fine, Done, no problem. Those who wanted to use a certain Frequency just had to ask to be Licenced to do so. If that Frequency was available for that purpose, for that area, and the use was indeed valid and proper. It would / should have been issued. The FCC acted as the Registrar, and trafic cop of the Air Waves. (Just like any state does for your roads) This "Auction" now changes all the accepted roles of the "Governing body" That which was "Auctioned" off now "Belongs" to private companies. (and no longer "Belongs" to Any of the "All the People") Companies that are no longer are acountable to "The People". It's as if your community, or State decided to "Auction" off your streets. You would then no longer be driving on public streets to your house. (That's happening now too in the US) We are entering the "Brave New World" folks. I hope you enjoy the trip. -d

DanLM
DanLM

The streets of America have and are being auctioned off... States and the federal goverment now are offering private firms the right to control previous public roads as toll roads to lesson the cost... And the same argument is being made that I think that you just presented.. http://www.usatoday.com/news/nation/2005-12-14-toll-roads_x.htm This isn't the article I was thinking of, but it spells out the same things that I read in a much more recent article. There still is goverment intervention though, goverment control of these assets... Just is it enough I think should be the question. Dan

JCitizen
JCitizen

airscape; but I was offered a legitimate piece of the pie for $10,000 dollars back in 1987 and I would have taken it if I hadn't unwisely invested it in something else. How do we know that some of these smaller offerings won't be taken up by small entrepreneurs like me? If you got a little nest egg and are aware of who is reselling it why not? It may not just be the big movers making a little scratch here!

Michael Kassner
Michael Kassner

I sense that many people are upset at the results. Most industry pundits, even "not remotely in the loop" me, pretty much felt that this was going to be the results. Just consider the amount of money required to setup the infrastructure. Newcomers would not be able to afford that kind of a rollout on any kind of a business plan the shareholders would like. For example already troubled Sprint maybe in more trouble, losing a portion of its allocated spectrum. As it has not been able to rollout the infrastructure for that portion of spectrum and the deadline is fast approaching. Another point is that AT&T already had a big chunk of the 700MHz spectrum from last year's buyout. I would like to throw out something for discussion as well. I was curious as to how the members felt about Google's hand in this. On one side they were helpful in forcing the bidding to a point where implied open source is a requirement. But, did they ever intend to actually use the spectrum? Would the others have had to bid so high, if Google stayed out of the bidding? It could be implied that Google was upping the bids and we as consumers will have to cover that additional expense. Hmmm.

JCitizen
JCitizen

if people were given enough time to react to this auction. Back when cell service was some crazy guys idea, a lot of small investors became millionairs because they were given individual offers to participate in purchasing cooperatives. I think a lot of people would have been more interested in participating in something similar this time, especially with the ho-hum stock market now; a good long term investment would have been attractive. However now that everyone knows that bandwidth is valuable they seemed to scramble for it before such a middle class reaction could organize in time. Bear with me as I am neither a big businessman or a big investor; but I've missed big, enough times, that I have become very aware of the pain of missed opportunities. Was the FCC in too big a hurry for this offer?

DanLM
DanLM

A long time in advance JC. I know I seen it months ago... But, I'm a news junkie... I read political, national, international, scientific, and just tech news every day... Too much I think some times... But, again... I do remember reading about the FCC putting up these specific bands for auction along time ago... I'm more inclined to think that nobody had the money to go up against the big boys.... Dan

JCitizen
JCitizen

eighties when the cell air space sold. But I couldn't swear to that. Thanks for the news, I don't keep up as well as I'd like to! Back then nobody wanted it or new what the heck it was, so the little guys pooled their money. I could still kick myself in the butt, but OH WELL! No point crying over spilled milk!

Michael Kassner
Michael Kassner

I agree and hope very much that what you talk about is still alive and well. I just don't think we all know the real story, as if it was that great, why did Google back down? They have the power, money and are organized enough to do what you suggest.

JCitizen
JCitizen

Like I was relating to DanLM; I was once offered a stake in the early cell service investment; back when people thought it was crazy to by blocks of "air" for small chunks of money. But I had already sunk my money into a worthless house; and have regretted it every since. Others who made the jump made out like bandits selling out to the big providers. Some of them may have hung on and earned royalties off the investment. I bet it pays better than CDs in a bank account!

Tig2
Tig2

In the citations posted, Google is characterized as the "happy loser". If Google phone was such a lucrative business line, why would they be so happy? It was considered that Google was on the cusp of doing something that the customers didn't really want and would have cost them many $$$ to develop as a line of business. But they DID manage to get "open" considerations packaged in the block. However, there is no way to know how that will be managed or policed. You are absolutely correct. Hmmm

PhilippeV
PhilippeV

All those past papers and intents promoted by regulators are just FUD. In fact the regulators only exist because existing large players fix the rules for their own exsting market. Their intent is really and has always been to become bigger and stop competition, and take more dollars from the c=pockets of consumers by providing them LESS services for the same price and MORE expensive bundles with services that consumers won't use as they don't need them, but will still pay, meaning more profit for the large players. When ou see the two that win the nationwide markets, they are both existing major players in the cable and phone markets; going to wireless changes the technology but not the players, in fact they are now entering in a market that was previously a niche where other providers could provide different services with very different selling conditions (and sometimes also free services). The FCC says that the result is fair, but it is not: those that won the local licences won't be able to survice the pressure, so the effective competition that will occur in the near future will be about which of the two nationawide major players will be able to buy the small local competitors: it will be easy or them to defeat the small because they are already making secret price agreements and offering comparable services, and are both targetting the same small competitors by trying to defeat completely their niche market: the majors will soon offer "free" services in their bundles, so the smallest will loose their profitability, and will be ready to be absorbed. Then the consulmers will be abused, once again, by seeing their contracts once again maodified, and the subscription prices going higher, with new bundles recomposed so that they will need to buy two bundles to replace an older one. Nothing is free in those bundles. Bundles are the key characteristic of abusive commercial offers proposed by all majors (not only in US, this happens as well in Europe). Today we can see that the major are only getting bigger, and cover much larger segments of the market, both horizontally and vertically. And the bigger they become, the most they are externalizing their services and making them more expensive for consumers for less services. Even the workers in those large companies are deresponsabilized, and customer supports become horrible and completely inhumane, you don't even know the personal name of your contacts, you're speaking to machines, you're handled like a number. Majors, when they get into the position of making large conglomerates, are killing the competition. Without competition, only profits are gaining, and true services are decreasing, prices are growing, and consumers are less satisfied but are given no choice so they cannot really contest as they need a significant part of the service that has become an utility. When any service has become an utility for general interest, no trust should be allowed to be perpetuated: they are killing the economy even if they are making larger profits. Verizon and AT&T getting the two nationwide licences when they are already majors? This is an insult to consuer and to the free-trade economy. It just means end of innovation in an area that was promized for new development. No governement should give any exclusive licence to majors. AT&T and Verizon should have been automaticially excluded from the initial bids.

DanLM
DanLM

sucked. Id rather have someone that does provide good service... ATT always has for me. And I have NEVER had issues with their customer service. One on one or via their automated. Maybe if small companies learned how to copy that proven service, they might have a chance. Sorry, small companies mean crap service in fast moving technoligy's that require major investment in infastructure. Screw that, as a consumer... Small companies WON'T get my money in this specific market. Dan

JCitizen
JCitizen

but in the mid eighties purchase cooperatives were organized to give small investors an opportunity [much the same way the stock market works] and then the big companies and small companies came and bought the part of those rights in the markets that made sense to their business models. There were definitely too many crappy little nets and .coms, but people in the small markets that were being neglected by Sprint and AT&T(Bell) were finally getting something for service, and in the mean time the little guy had an investment opportunity. The sad thing is now it seems like the big companies are given the opportunity to horn in on the market before the anyone else could organize a cooperative to take advantage of the "Oklahoma Land Rush".. It takes time to put together the kind of investment money to fight the likes of those two.

JCitizen
JCitizen

the Science Channel had an article on it. I'm intensely interested in altenate energy also. There is a guy up in Detroit that invented a very efficient solar panel made with nano-tech that can be severly damaged and still put out high efficiency energy. If my foggy memory is working right I think he was getting close to 30% efficiency, which was previously unheard of. When you got your whole house painted in solar panel this is not a consern however, as it is so cheap and large surface area; I would think way more cost effective!

DanLM
DanLM

I guess thats the word I'm looking for... Just was following up. Joe/Jane six pack still can get my patronage. it just won't be in a market where it requires heavy investment into an infastructure... Unless he is the one to start it.. Never give up on Joe/Jane Six pack... More idea's, good idea's, have been hatched around kitchen tables then we will ever imagine... And they still are. Now, the Joe/Jane Six pack is an engineer with 20 years experience comeing up with new methods for alternate fules, renewable energy. That is where if I had the money, I would love to invest right now.... Or, recycling of hazerdous components which will be needed for alternate energy... Hell JC, did you see the link I put up about a UK company that makes clapards(I think it's siding?). They had a college intern researching paint for these clappards to find a way for it not to break down due to sun and weather... He stumbled on a way to make the paint collect the solar energy for use... Joe/Jane six pack... Dan

JCitizen
JCitizen

I was just pointing out that for some markets what happened in the past was good for a lot of people. Now that bandwidth of any kind is seen as valuable "real-estate" only the big players will be able to invest. I'm not saying that is necessarily bad, but I miss the day when joe six pack could plunk his nest egg down and become a millionair.. I speak from personal experience too; as I was one of the unfortunate ones that had already invested in dirt real-estate and missed my opportunity to make it big in "air-estate" :(

DanLM
DanLM

First it was ATT, they sold out to Cingular, then it was ATT again... That is how long I have been with them. It's easy to change phone service, it's hard to find good service. Thats why I have never switched providers. Dan

MGP2
MGP2

PhoneAnon, or Callers Anonymous, or whatever "12 Step" program someone can create to break this world of their addiction to the phone. It really is pathetic that someone can't drive from their home to the corner store without their phone plastered to their ear. They can't spend one single day in work without making or taking several personal phone calls. (Emergency/Urgent calls are another matter entirely.) As long as people stay addicted to their cell phone "crack", providers have no reason to change. Here's what I did. When my last contract expired, I went out and bought a $20 AT&T/Motorola GoPhone. I buy a $100 calling card that lasts me an entire year. How? Well, I don't call all my friends every single day when I should be working. I don't spend all day sending foolish (not to mention "not free") text messages. And I certainly don't need to watch TV or movies or any other type of videos on a 1 inch by 1 inch screen. Thus, my cell phone usage averages me $8 per mohth (the cost of the $100 card over the course of the year). In short, if you keep giving them your money, they're gonna keep on taking it. Simple enough.

Tig2
Tig2

The FCC auction of the 700MHz band has finally produced some winners. The question is if we are among them. Verizon and AT&T certainly got what they wanted but we, the people may have been shafted. After all, it was hoped that a third player in the home broadband space would emerge- and that clearly did not happen. The question is simple. Do we even care? Or is this just another example of "the big get bigger"?

dsusysmgr
dsusysmgr

The FCC have been promising the Police,Fire, and EMS services of this country more frequencies for decades. They always said wait untill the change in TV! I guess we know what talks at the FCC. DSUSYSMGR MCSA, A-EMT-I

Michael Kassner
Michael Kassner

I thought I would add this quote from a MRT article as it is relevant to why the D block will be hard to sell. "Sprint Nextel pleaded its case this week before a federal appeals court regarding an FCC order issued last fall that requires the carrier to vacate its 800 MHZ channels by June 26, regardless of whether reconfiguration is completed. Sprint believes doing so is unfair and places an undue burden on the carrier to find a temporary home for tens of thousands of its iDEN customers until channels currently occupied by public safety licensees are freed. As I?ve written before in this space, I couldn?t agree more with Sprint on this matter. The dispute never should have reached the courts. The FCC failed to quickly recognize that the ?minimum cost? provision of its original rebanding order was the single biggest factor in the glacier-like pace of negotiations between Sprint and the public safety licensees. Once the FCC clarified what it meant?two years after the reconfiguration began?the pace of negotiations picked up considerably. But the rebanding project is woefully behind schedule precisely because so many negotiations took so long. Consequently, the FCC should give Sprint a break on this issue. The carrier says it will be ready to vacate its 800 MHz channels, wherever reconfiguration has occurred, within 60 days of a public safety licensee?s request, as required by the order. That should be enough. There could be another reason beyond fairness for the FCC to cut Sprint some slack, as pointed out to me this week by MRT Senior Writer Donny Jackson. The 700 MHz auction ended this week, with just one bidder for the 10 MHz D Block. The $472 million bid was well below the FCC?s $1.3 billion reserve price for the airwaves, which are supposed to be paired with 10 MHz of adjacent public safety spectrum to form the backbone of a nationwide broadband wireless network for first responders. Speculation for the lack of bidding has centered on the reserve price and the penalty established by the FCC that would require the D Block winner to forfeit 10% of the reserve price should it be determined that it failed to negotiate in good faith with the Public Safety Spectrum Trust, the FCC-designated licensee for public safety?s spectrum. Indeed, those conditions by themselves would have been enough to give potential bidders pause. But also hanging overhead, like the Sword of Damocles, is the unprecedented public/private partnership that is supposed to build out the network. The fact that such a partnership never has been attempted on a project of this scale would be enough to make any commercial entity wary. But they also had to be wondering about the performance requirements for the network?99.3% coverage of the nation?s population and 99.9% reliability?and whether the FCC would treat them fairly in terms of meeting those requirements. Cutting Sprint some slack in the 800 MHz dispute would be the right thing for the FCC to do. It also would be the intelligent thing. Unfairly holding Sprint?s feet to the coals by forcing it to prematurely vacate its channels would send a terrible message to any commercial entity still contemplating taking a shot at the D Block spectrum, should the FCC decide to re-auction it. "

JCitizen
JCitizen

small markets, especially where Sprint was involved. I know a lot of small communities who have NO internet or are beholding to SPRINT dialup and want broadband who are being blocked by state or FCC authorities from starting their own cooperatives. Otherwise I would have thought that would have been a God given right to start a cooperative in your own community; as long as you can gather the bucks for infrastructure!

Toreo
Toreo

The common people that work for a living are no longer important. Providing many services to all is forgotten. You know the saying money talks..and everything and everyone else is forgotten. In a sense we support this by buying all these services from the non-caring corporate and seemly government entities of our country. Bless all the EMT's world wide for the good work you do for all human beings.

Michael Kassner
Michael Kassner

That EMS portion of the frequency band will most likely be part of another auction. It really was not totally the FCC's fault, as no one wanted to meet the minimum bid. It is partially the FCC's fault that it mandated several requirements on that portion of the spectrum that almost make it impossible to develop a feasible business plan.