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Feb. 16, 2008

To this date, the FCC has earned a little over $19.38 billion in its popular wireless spectrum auction.

However, a well-known industry consultant believes that overall activity for the coveted C-blocks is probably finished by now, with Verizon clearly the winner and AT&T the loser.

Tom Peters of Wireless Strategy said that everything happened the way Verizon hoped it would.

All of the remaining action in the highly popular spectrum auction is in the smaller A, B and E blocks. “They’re just kind of dragging on... In A, B, and E, each round has been mostly consistent. There are some smaller bidders warring over the local licenses.”

"For the nationwide C-block, the high bid stands at $4.6 billion from Round 17, widely believed to be from Google. That bid even surpassed the reserve price, therefore requiring whoever wins it to open the spectrum to competition," added Peters.

However, in Round 30, the total from all bidders for the regional blocks reached more than $4.7 billion, mostly led by Verizon, thereby knocking out Google. After that, Verizon and all other players exceeded their FCC bidding eligibility units, so the C-block auction is basically finished, Peters explained.

By also bidding on the D-block, which is the one requiring its winner to build a public safety network, Verizon intentionally lowered the amount that it was required to bid elsewhere to maintain its eligibility for the later rounds, Peters said.

That way, bidding for the D-block was just part of a bigger strategy. Peters said “nobody can bid on it and it’s going to go back to the FCC, which will probably re-evaluate and then lower the requirements for that spectrum."

Peters was quick to point out that “it didn't go down the way AT&T planned. That major carrier had to bid $1.6 billion in the Mississippi Valley region alone to block Verizon from grabbing all six regions in the continental U.S., after which AT&T didn’t have the flexibility for other bids."

"The results will ultimately hurt AT&T’s bottom line and help Verizon’s. The next big question will be how Verizon defines the term open access. Verizon likely will use the spectrum for LTE networks. The WiMAX Forum announced today that Mobile WiMAX could also employ such spectrum, but it’s not believed that Verizon has any interest in that," said Peters.

As of 10 a.m. EST yesterday, Round 76 was completed with no significant changes. Round 77 opens at 11 a.m. EST on Monday.

As a rule, U.S. bidders are barred by the FCC from commenting until the auction is fully complete. That could still be several months away because of the D-Block uncertainty.

Even after that, bidders still can’t comment until down-payments are paid for the licenses, the various carrier representatives explained.

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Source: The FCC.

    This article was featured on Business 5.0.