As anticipated, the FCC on Tuesday adopted geographic licensing and service rules for the 700 MHz band that will pave the way toward an auction that could rank as one of the largest competitive bidding events in FCC history. The channels covered by the FCC’s order are to be reclaimed from television broadcasters as part of the digital television transition and are highly coveted for their ability to penetrate buildings and to travel over long distances. As the 700 MHz band is viewed as especially desirable for rapidly emerging broadband wireless operations, experts predict that auctions of this spectrum to take place next January could reap in excess of $15 billion. In accordance with draft rules circulated early last month, the order requires the winner of the 22 MHz “C” block to open its network to devices and applications (such as e-mail and video programs) of the customer’s choice as long as no harm is caused to the network. The winner of the 10 MHz “D” block would be required to complete a nationwide network sharing agreement with the adjacent public safety licensee that would give public safety entities priority access to commercial frequencies during emergencies and that, in turn, would provide the D-block licensee with secondary access to available public safety spectrum. The order also (1) prescribes an anonymous bidding format, (2) directs the Wireless Bureau to establish reserve prices for each block and (3) sets forth strict construction milestones that require cellular market area and economic area licensees to cover at least 35% of their geographic area within the first four years and 70% by the end of the ten-year license term. (The C-block winner must cover 40% of the population within four years and build out at least 75% of its market by the end of the license term.)
Although FCC Chairman Kevin Martin proclaimed that the order strikes “the right balance between providing incentives for infrastructure investment and fostering innovation for new services and products,” reaction to the ruling was mixed, even within the ranks of the agency’s commissioners. Issuing a partial dissent, Commissioner Robert McDowell protested the adoption of Carterfone-style open access provisions for the C-block, declaring: “in the absence of market failure, I favor a market-based pro-competition solution to the challenges raised in this proceeding over a prescriptive regulatory approach.” Claiming, however, that the new rules don’t go far enough, Commissioners Michael Copps and Jonathan Adelstein took issue with the FCC’s refusal to consider rules (championed by Google) that would have imposed a wholesale access mandate on the C-block winner, as Adelstein lamented: “we may have missed a golden opportunity to open that elusive third channel into the home.” While applauding the FCC for taking “the appropriate approach by recognizing the importance of not restricting the number of auction entrants nor requiring them to fulfill wholesale licensing requirements,” Steve Largent, the president of wireless association CTIA, added: “we are disappointed that a significant portion of this valuable spectrum will be encumbered with mandates that could significantly reduce the number of interested bidders.” Google—which had promised last week to enter the auction with an opening bid of $4.6 billion if the FCC adopted wholesale provisions for the C-block—said it would review Tuesday’s ruling before deciding whether to participate in the auction.