FCC Takes Second Shot at D-Block Auction

Published August 1, 2008

The Federal Communications Commission (FCC) is making another attempt to auction the “D-block” spectrum and has issued a request for public comment on the idea.

The May 14 FCC request came in the wake of the otherwise-successful spectrum auction held in March 2008.

Failed at Main Goal

By the end of FCC’s auction of the 700 MHz part of the analog spectrum, the commission had earned a record high $19.1 billion, but it failed to sell a significant part of the spectrum–the 10 MHz D-block.

The sale of the D-block would have required the buyer to build and operate a nationwide wireless system to be used mainly for public safety communications in addition to commercial wireless communications.

According to FCC Commissioner Michael Copps, the successful sale of the D-block and construction of a wireless network dedicated to public safety was one of the most important parts of FCC’s plan for auctioning parts of the analog spectrum, which will be vacated by the mandatory switch to digital television broadcasts in February 2009.

“Auction 73 brought us both good news and bad, but on the most important score–providing for the public safety–the news is still out and the really hard work is just beginning,” said Copps in a public statement after the auction. “We are still nowhere near improving the sad state of communications infrastructure available to America’s heroic first responders.

“And remember this,” Copps continued. “Public safety was a primary, and in some minds the hands-down, most important reason, that we reclaimed TV channels 52 through 69 in the first place. So there is no more important mission for the FCC in 2008 and beyond than finishing this job and doing it right.”

FCC Faulted for Failure

One bid was submitted for the block, but it was for far less than the $1.3 billion reserve price, so the spectrum segment went unsold. Gennady Stolyarov II, editor-in-chief of the Rational Argumentator Web site, says FCC is to blame for the failure of the D-block to sell.

“In general, I believe that any attempt to move government assets into the private sector is desirable, as it eliminates the need for taxpayers to fund those assets. Nonetheless, the FCC’s highly stringent requirements for how the D block must be used after the auction doomed this particular attempt from the beginning,” said Stolyarov.

“After all,” Stolyarov continued, “how many companies would be interested in creating an emergency communications network using the spectrum? Surely the regulators at the FCC could not have been so knowledgeable as to say that this–and precisely this–would be the use to which the unhampered market would put this block of the 700 MHz spectrum.”

Government Control Is Culprit

Cord Blomquist, a technology policy analyst and online editor for the Competitive Enterprise Institute, agrees.

“The D Block debacle is part of a larger problem with the FCC. Unlike nearly any other resource, wireless spectrum in the United State is controlled entirely by the government,” said Blomquist.

“The FCC is the equivalent of a steel or coal planning board in the old Soviet Union,” Blomquist continued. “We can’t turn the airwaves into a market-based system overnight, but we can take steps to make it as market-like as possible in the short term.”

Flexibility Suggested

Blomquist recommends FCC rethink its policy concerning the auction. While it is not necessary to eliminate the public safety component of the spectrum sale, FCC needs to make it worthwhile for bidders to try to buy the spectrum, he says.

“With that in mind, my first suggestion would be to lift the reserve on the auction, but only after the licenses being offered are modified so that they become a desirable investment,” said Blomquist. “The licensees will have to offer their services to public safety, but they should be allowed to lease excess capacity to commercial interests–this would be only secondary, of course, and public safety should have priority.

“Minimum performance standards will need to be laid out by the FCC to ensure that public safety standards are met, but the FCC should not go so far as prescribing specific technologies–an issue better tackled by the network operators themselves,” Blomquist continued.

Considering New Approaches

FCC is planning a new auction and has been taking comments and suggestions about how the D-block should be used. Some ideas offered include a public-private partnership to build a wireless public-safety network, similar to the original plans, or a national wireless Internet system.

Regardless of which plan FCC uses, Stolyarov thinks it must be significantly changed if there is to be a successful sale.

“My great hope is that this requirement will be more reasonable than the one that mandated the creation of the emergency communications network, and that therefore the D-block will be successfully privatized and put to better use than its current status allows. I do salute the FCC for repeatedly trying for privatization and for discarding failed ideas upon demonstration of their failure,” said Stolyarov.