Everything You Always Wanted to Know About the 700-MHz Auction but Were Afraid to Ask

From Google to the FCC, the new race for America’s last broadcast spectrum holds many secrets. One of America’s leading tech pundits unlocks the ones you need to know.

Published on: January 24, 2008

When analog television broadcasting goes dark in the United States on February 17, 2009 and the huge analog transmitters of more than 1600 broadcast stations are turned off, what will happen to those radio frequencies formerly used for analog TV? Well, for UHF channels 60 to 69 the future will be decided starting this week as the Federal Communications Commission begins to auction that reclaimed bandwidth, bringing at least $10 billion into the treasury from auction winners and possibly allowing a dramatic expansion of wireless spectrum for cellular voice and data communication. Or maybe not, since it is just as likely these frequencies will be bought by incumbent wireless providers who may choose to simply let the channels go unused so as not to threaten their existing businesses.

This could be just a technology story, but like nearly anything that involves government regulation and big business, it is far more than that. The FCC wants money—lots of money—from the auction that begins today. There are hundreds of bidders, but the big money has long been expected to come from the usual suspects—the half-dozen companies that compose America’s mobile phone oligopoly, with giants AT&T and Verizon making the most noise about buying, if not actually using, the spectrum. Then last year Google said it would be bidding, too, and tried to impose requirements for open access to the auctioned spectrum (i.e., loosening the grip cellular providers have on what phones and services their customers must use), some of which were accepted by the FCC.

Why are all these companies so excited? Because the 60 MHz of spectrum that’s about to be auctioned is the last prime real estate for mobile communications that will be available in the U.S. for decades to come. And it lies in the 700-MHz band substantially below the 800- to 850-MHz and 1900-MHz frequencies already used for U.S. mobile phones. In this case lower is better since 700-MHz signals propagate better, spreading farther and penetrating buildings more easily than higher frequencies. This greater range means that each 700-MHz cellular antenna can service a larger footprint, which means fewer cells (those interlocking service areas that a “cellular” network is made up of) will be required overall. That should, theoretically, make it cheaper—$5 billion cheaper according to some estimates—to build a national wireless network.

What’s good for voice is not always good for data, however. Lower frequencies travel farther but they inherently carry less data, having lower so-called spectral efficiency. And the way cellular providers plan out data networks is very different from the architecture of voice networks. Optimal data networks (such as the EVDO services currently run by Verizon and Sprint, and the HSDPA network run by AT&T) require smaller cells and lower power to reduce interference and increase the total data throughput not per cell but per square mile. Even the best implementations, however, have limited overall bandwidth (as one network engineer told me, “the dirty little secret of cellular data is that two customers with Slingboxes can take down an entire EVDO cell”). Networks based on the 700-MHz spectrum would be even less ideal for use as a data network in urban environments. Which makes one wonder: Why is a data-centric company like Google even interested?

As they say in Brazil, “He who has no dog hunts with a cat.” This 700-MHz auction is the only one available, so Google appears to be going for it. Having obtained some concessions from the FCC, Google apparently feels bound to bid at least the minimum $4.6 billion for one block of spectrum known as the C Block. The question is whether Google is actually bidding to win or simply bidding to make sure some of its open access requirements are imposed on an eventual winner, which will only happen under FCC rules if the bidding for that C Block goes to at least $4.6 billion.

Some pundits (that would be me) think Google will bid to win its spectrum block, then will trade that block to Sprint/Nextel for some of that company’s 2.5-GHz WiMAX licenses that are far better suited for data. Sprint Nextel, the number three U.S. mobile operator, is conspicuously absent from this week’s list of bidders, and its WiMAX strategy is in flux following the recent firing of CEO Gary Forsee, who was a big WiMAX backer. As the auction winner, Google could impose on Sprint Nextel its full open access requirements for the 700-MHz band (not just the limited access mandated for the band last year by the FCC), then extend that same access to its new WiMAX frequencies in a kind of one-two punch that would dramatically open up wireless data nationwide (that’s good for you and me). FCC chairman Kevin Martin was asked last week about just such a Google switcheroo and said the Commission would have no problem with it.

The FCC has interests in this spectrum that go beyond making money, though. Hurricane Katrina showed that the government’s disaster communication capability was far below what it should be, so 22 MHz worth of the total 60 MHz being auctioned this week is intended to be devoted at least in part to public service. In this case the winning bids are likely to be lower because the spectrum comes with the requirement that a network actually be constructed (winners of the rest of the auctioned spectrum can simply sit on it for up to four years, building no physical network, which Verizon, for example, might do) and in case of a national emergency the network could be taken over for government use.

But wait, there’s more! The thought of unused or underused spectrum got the juices flowing at companies including Intel, Microsoft and Philips, who banded together to propose that they be allowed to offer unlicensed data service in so-called “white space” within and between existing broadcast frequencies—piggybacking, as it were, on the bandwidth allocated to TV broadcasters and wireless providers. The first white space technical trials failed last summer, but just this week the FCC allowed the group to schedule a second set of trials with improved equipment.

While the concept of inserting data in an existing active communication channel may seem bizarre, it is important to remember that this was precisely the origin of Ethernet, today’s most popular method of networking computers. Using a coaxial cable as a kind of party line for data, universities in the 1980s often ran thousands of workstations simultaneously on literally the same wire. The pioneers of white space networking propose to do the same thing wirelessly, which makes one wonder what effect it would have on any incumbent network’s strategy to win spectrum and then bank it for later use if that spectrum could be effectively viewed as white space and co-opted for free overnight.

As if all this wasn’t complicated enough, this week’s auction involves multiple rounds, hundreds of bidders and thousands of actual licenses since some of the spectrum will be auctioned separately for local markets. It will be summer before the winners and losers become clear.

Robert X. Cringley is the host of the PBS miniseries Electric Money. He is the author of the best-selling Accidental Empires: How the Boys of Silicon Valley Make Their Millions, as well as articles for The New York Times, Newsweek, Forbes and, from 1987 to 1995, a trailblazing technology column for InfoWorld.


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