700 MHz Spectrum Auction: Incumbents Prevail, But Some Change is on the Horizon

• Posted: Sunday, March 30, 2008
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• Author: pradhana
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• Filed under: Wireless Service

The FCC's spectrum auction 73 is over, and as winners of the various blocks have been announced, its implications become clearer. Verizon Wireless and AT&T were the major winners across the board, together accounting for more than 80% of the auction's $19.1 billion in bids.

Verizon won seven of the 12 Regional Economic Area Groups (REAGs) in block C which provides nationwide coverage in the continental United States and Hawaii, and which also carries an "open network" requirement for the license holder. According to ABI Research senior analyst Nadine Manjaro, "These licenses will enable Verizon to extend coverage into rural areas and potentially pose a significant threat to rural operators.

In addition, since Verizon has announced plans to deploy LTE, it is highly likely that LTE will be deployed in this frequency band." "It's no surprise that Google didn't win," Manjaro continues. "Google just went in to get the networks opened up. They did achieve their goal of requiring that the networks be open to whatever devices they intend to bring to market, without incurring major costs. The rules of the C block requires the spectrum to be open to any device and any application."

EchoStar, which won a nearly nationwide footprint in the E Block, could be the new mobile broadband operator which the FCC hoped the 700 MHz auction would produce. EchoStar could potentially deploy mobile WiMAX services similar to those of Sprint and Clearwire, realizing its longtime strategic goal of adding broadband data services to its video offering. A major hindrance, however, says Manjaro, is that EchoStar only has six MHz of spectrum in each market compared to Sprint's approximate 90 MHz in each market.

There is one other fly in the ointment: the failure of the D Block emergency services part of the spectrum to attract the required minimum bid. While some have suggested that Sprint might spin off the Nextel iDEN network to form the basis of a new nationwide public safety network, Manjaro disagrees: "Sprint is committed to iDEN, and has announced plans to grow it to 36 million customers.

After this major disappointment for the FCC it's back to the drawing board for them, and I think they will re-run the D Block auction with new requirements - probably lowering the reserve price." "The results of this auction will mean changes for existing operators," Manjaro continues.

"With flat rate pricing, all operators are now commoditizing the bandwidth. They will have to get creative in developing new services to increase revenue. Some are already starting down that path, with Verizon creating its A-IMS (Advances to IP Multimedia Subsystem) platform and kicking off its Open Development initiative, which allows third-party developers to build new applications and services for the network.

That means consumers will win through flat-rate pricing and the ability to buy any device and use it on any network. That's what the FCC wanted, and to me, it looks like a win-win situation, except for the rural operators mentioned above." [ABI Research]

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