700MHz Auction: Life on the D Block List

Bidding in the FCC’s 700MHz spectrum auction has slowed, and while that’s good for the companies hoping to snag valuable waves for wireless broadband applications, it only highlights the inactivity on the much-publicized D Block. Yet, if pundits are right, the news shouldn’t come as a shock. The way they see it, the block’s fate was doomed from the start.

“I think the thing was sort of misconceived from the get-go,” says Kenneth Ferree, president of the Progress & Freedom Foundation, a market-oriented think tank in Washington, D.C.

That’s partly because the winning bidder, if any, on the D Block, would be required to build a national wireless broadband network that, during times of emergency, would be used exclusively by first responders. At all other times, the licensee could use the spectrum for commercial purposes. But it appears no one besides the now-defunct Frontline Wireless saw that as a good investment.

“I think it was far-fetched to think that somebody was going to come along and build this new private network and have to try to compete with the big dogs that are already heavily invested in the market,” Ferree says. In other words, he adds, the FCC should have partnered with existing carriers such as AT&T Inc. and Verizon Communications Inc.

Unanswered liability questions and onerous rules also may have contributed to the lack of interest in the D Block.

“There’s always been some concern about how this partnership would work and whether parties would really be comfortable with the level of protection the commission will demand to protect the public safety community,” explains Harold Feld, senior vice president of Media Access Project and a recognized expert on spectrum and Internet policy.

The D Block also harbored strict requirements, such as a nonrefundable down payment of nearly $130 million and an obligation to work with the Public Safety Spectrum Trust (PSST). That’s where things get a bit complicated, says Feld, and possibly even shady.

The PSST is a non-profit corporation that holds the FCC license for half of the D Block. But it can’t make any money until a commercial provider wins the D Block auction. Cyren Call Communications, a firm backed by Nextel co-founder Morgan O’Brien, last year became the PSST’s “advisor” and in late January finalized a deal to fund the entity. The funding news came a couple of weeks after Frontline Wireless, which had butted heads last year with Cyren Call over public-private spectrum rules, closed its doors.

There are unsubstantiated allegations — which, because of anticollusion rules, can’t be explored until the 700MHz auction wraps — that Cyren Call and O’Brien played a key role in the demise of Frontline Wireless, the expected D Block buyer and commercial operator. Members of Congress have taken notice, and Feld expects lawmakers including Reps. Henry Waxman, D-Calif., and Ed Markey, D-Mass., to “be looking over the FCC’s shoulder throughout this whole process.”

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