D-Block Reauction a Likely Flop, Says Lawyer

The FCC probably can’t reauction this year, given lack of consensus on how to do so, Sinderbrand said. Sinderbrand is a partner in Wilkinson Barker & Knauer, whose clients also include Verizon and Sprint Nextel. The FCC’s desire to see a new entrant get the block complicates matters, he said. “Other than AT&T and Verizon, I don’t know who could possibly build that network,” he said. If the FCC “games” the auction to keep them out, the sale probably will fail, he said.

The proposed private-public partnership arrangement was a “shotgun marriage,” Sinderbrand said. The public and private sectors had different views on how to use spectrum, and the 700 MHz auction wasn’t certain enough “to make anyone in their right mind” want to bid the reserve, he said. Carriers were to meet all public safety needs, no matter how costly, he said. And carriers would have been fined if they couldn’t reach a deal, he said. “It’s not surprising it failed.”

The FCC need not release more spectrum to make an interoperable safety network, said Darrin Mylet, wireless services vice president for Cantor Fitzgerald. “Don’t throw it out there,” he said. “Everybody’s got enough spectrum. Let’s be smart. Maybe we should wait and come up with some better ideas.” Alternatives exist, agreed Sinderbrand, “but the politics say that you can’t take [the D Block] away once you've given it to [public safety].”

Another idea would be to put $9 billion in extra auction revenue toward a public safety network, Sinderbrand said. Congress expected $10 billion, but got $19 billion without even selling the D Block, he said. “If you just took the D Block and sold it, no strings attached,” it might bring $5 billion, he said. In that case, “you've got $14 billion extra to build out a public safety network” controlled by public safety and meeting its needs, he said.

It’s hard to say when carriers will roll out 700 MHz spectrum won in this year’s auction, Mylet said. “Spectrum is very under-utilized in this country,” he said, saying 85- 99 percent of public and private sector spectrum isn’t used in the U.S. Verizon and AT&T had a “ton” of PCS and cellular spectrum before buying 700 MHz, he said. “It seems odd to me that they would need more.”

“The jury is still out” on whether the advantages of 700 MHz “are as significant as people say,” Sinderbrand said. Winners of 700 MHz spectrum could face problems implementing it, he said. It’s harder to use 700 MHz in an urban area than, for example, the 2.5 GHz that Sprint uses for WiMAX, he said. Lower frequency spectrum goes further and needs fewer base stations, but that feature creates more potential interference issues, he said.

Another challenge is backhaul, Mylet said. The spectrum gives a lot of capacity between the tower and the handset, but the wireline infrastructure connecting the towers must be up to spec, he said. About 70 percent of backhaul in the U.S. is 1-4 T1 lines, he said. One T1 line has 1.5 Mbps capacity. “There’s a big challenge there, putting all that spectrum to use,” he said.

Carriers could lag at building out 700 MHz for lack of regulatory pressure, Sinderbrand said. Historically, the FCC “tends not to be real strict” on build-out deadlines, he said. “The commission’s good about saying, ‘We want quick buildout,’ but in the end they tend to cut people a break.” T-Mobile built out advanced wireless service spectrum fast after it was auctioned, but that’s because Wall Street was pressing the carrier to sell 3G services, he said.

Verizon and AT&T weren’t the only winners in the 700 MHz auction, panelists said. Regional carriers got many smaller licenses, and they'll eventually use spectrum for wireless broadband in their service areas, Sinderbrand said. And it will be “interesting to see” what EchoStar does with the E Block, Mylet said. “Certainly this was an auction dominated by two companies, but other people went away happy,” Sinderbrand said.