O'Brien Urges Changes in D-Block Rules, Expects Interest in Spectrum

“We'll be out there, as it’s our job to do, trying to encourage as many players as possible,” O'Brien said in an interview. “Why wouldn’t we want Frontline to be in that auction? Of course we wanted Frontline to be in that auction. I didn’t want Frontline or anyone else to bid not knowing what the reasonable expectations [of the PSST] were going to be.”

The FCC should revise the D-block to encourage companies to bid, O'Brien said. “There are some easy things that can be changed that are also obvious,” he said. “One is having a lower reserve price and another is not having a penalty for failing to reach an agreement with public safety. We have felt all along that that was too onerous.”

A lower build out requirement could save billions for a potential bidder. The PSST is unlikely to take the lead pushing for that, O'Brien said: “On the other hand I wouldn’t be surprised to see the FCC look at the coverage issue because it has an effect.” O'Brien expects more commission guidance on its role. “My impression is the FCC will do everything it can to take negotiating out from the backend after the auction… and put it in the front before the auction,” he said.

Major U.S. wireless players will consider bidding for the D-block, he said. “ There is no such thing as too much spectrum,” O'Brien said. “I would expect everybody to be at least thinking about it.” But he conceded that the spectrum is encumbered. “It is a novel concept full of complications,” he said. “It’s a more difficult thing to do than it is to simply raise your paddle and bid on unencumbered spectrum, which you then have complete discretion over.”

Even in a tight capital market, companies could raise the funds to bid and build a network, O'Brien said. “Part of our responsibility at Cyren Call is to go out there and do everything we can to facilitate [bidding] and make it understandable and to show how desirable of opportunity this is despite its complexity.” But, he said, “It would be hard to find a worse time in the last 10 years to try to find this kind of money.”

O'Brien said he knew Cyren Call would face criticism when it discussed the cost of leasing spectrum. The PSST made clear before the auction that the D-block bidder would have to pay $500 million over 10 years to lease access to spectrum controlled by public safety. Discussions between Cyren Call and Frontline Wireless before the auction are among issues getting scrutiny by the FCC Inspector General.

“We would have been more subject to legitimate criticism if in advance of the auction the PSST had nothing to respond to complaints that were filed at the FCC,” O'Brien said, adding that Verizon, AT&T and Frontline all “said, ‘We need to know more about what public safety’s expectations are before we come to this auction.'” Citing the $500 million figure, he said Cyren Call “considered whether it was a good idea to give a number or not… The decision was when asked to give a number. We thought it was more fair.”

The sum was not a “demand” but a “negotiating position” subject to FCC approval, O'Brien said. “I am baffled at the difficulty some had in understanding that very reasonable step,” he said. “You can have a debate about a number, but that’s what the negotiating process was for… We would have been much more likely subject to criticism had we said nothing and had a failed auction. The line would have been, ‘Of course we had a failed auction. Nobody knew what public safety was thinking.'” It was a “damned if you do, damned if you don’t” situation for Cyren Call, he said.

Complaints of Cyren Call trying to profiteer on public safety’s back incense O'Brien. “Of course that’s what people are saying,” he said. “I'm reading all this stuff on the blogs: ‘Who gets the lease payment?’ Answer, the PSST. ‘What’s the PSST, which is a nonprofit, going to do with those payments?’ It’s going to perform the responsibilities that the FCC gave it.” He justified the PSST’s share as necessary to its welfare. “It’s nice to say, ‘Public safety is public safety,’ but they still have to pay their bills,” he said. “There’s tremendous responsibility placed on the PSST. Of course they have to have some source of funding.”

Qualcomm did bid for the spectrum, though at a level far below the reserve, O'Brien noted. “There was a bidder,” he said. “We don’t know if that bidder will come back. You can’t infer much from the bid.”

Meanwhile, other major 700 MHz auction players commented on the auction after the anti-collusion deadline. Verizon officials said Friday on a call with analysts that the 700 MHz spectrum it bought will be used to roll out its 4G network, based on Long Term Evolution (LTE) technology.

“It is critical to make sure that we're on the right technology,” said Lowell McAdams, CEO of Verizon Wireless. “You are all aware that we have announced our selection of LTE. Now, LTE clearly seems to be becoming the global standard.” Besides partnering with Vodafone, Verizon Wireless is in field trials with that company and is working with China Mobile, with India, and other large carriers. “There’s a great opportunity to align and accelerate the deployment,” he said.

LTE offers throughput as high as 100 Mbps, McAdams said. Verizon Wireless expects speeds of 75 Mbps for downloads, compared to below 5 Mbps for 3G technology. “That gives you a sense of the magnitude of shift here and what applications will be possible when you have that kind of throughput,” said McAdams.

Qualcomm had no more comment on its D-block bid. But MediaFLO President Gina Lombardi told us Friday that the eight E-block licenses Qualcomm bought will give the company more spectrum to deliver additional mobile TV service.

“Market research will be conducted and a more specific channel plan will be made in accordance with the results. A broader offer including family, sports and local packages will be initiated,” Lombardi said. The price plan for the service will debut in about a year, she added. Lombardi expects no major changes on handsets.

Expiration of an FCC anti-collusion rule deadline clears the way for talks, perhaps leading to mergers and acquisitions, said a report by Medley Global Advisors. Deals involving larger bidders will be difficult to complete by year-end, it said. Smaller carriers face less rigorous regulatory review, but a Leap/MetroPCS deal still is not ripe, Medley said. CenturyTel is back in the wireless business with a defensive strategy aiming at reducing wireline churn throughout its existing market, the firm said.