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700 MHZ BAND SPECTRUM AUCTION AND ITS EFFECT ON CELLULAR USE AND TECHNOLOGIES WITHIN THE UNITED STATES AND ITS TERRITORIES by Jeremy R. van Frank email@example.com A Graduate Research Report Submitted for INSS 890 in Partial Fulfillment of the Requirements of the Degree of Master of Science in Management Information Systems Bowie State University University of Maryland University College in Europe November 2007 TABLE OF CONTENTS ABSTRACT iii LIST OF TABLES iv LIST OF FIGURES iv CHAPTERS 1 I. INTRODUCTION 1 Proposal 1 Background 1 Sub-topics 1 Importance of the Study 1 Methodology 2 II. LITERATURE REVIEW 3 Significance of the Spectrum 3 Planned Usage of the 700 MHz Band 7 FCC Auction 73 10 III. ANALYSIS AND DISCUSSION 16 IV. CONCLUSION 18 REFERENCES 19 APPENDIX 22 A. FCC AUCTION 73 / 76 LICENSE MAPS 22 ii ABSTRACT In February 2006, the Digital Television Transition and Public Safety Act of 2005 was signed into law requiring that after February 17, 2009, only digital television signals will be legal within the United States and its territories. In the same law, a requirement was set that the spectrum freed by not transmitting analog signals will be auctioned off no later than January 28, 2008 (The Act was a section of the Deficit Reduction Act of 2005). As many broadcasters were given digital channels in addition to their current analog channels as it is a fact that several digital channels can be transmitted using the same frequency range as one analog channel, there is over 100 MHz being ‘opened’ up due to the shift to digital television (standard analog channel occupies 6 MHz, which is sufficient capacity for 7-12 standard definition digital channels). This bandwidth is viewed as the last chance for a company without a national cellular/wireless footprint to create one. iii LIST OF TABLES Table 1: Cellular Carrier Spectrum Holdings (Flannery, 2007) 4 Table 2: Potential Frequency Bands for Multimedia Distribution (Qualcomm, 2007) 9 Table 3: Estimated 700 MHz Band Market Value Based on AWS-1 Bids (FCC, 2007b) 10 Table 4: Google License Condition Requests (Google, 2007) 13 LIST OF FIGURES Figure 1: Spectrum Band versus Cost Comparison (Townsend, 2007) 5 Figure 2: Data Spectral Efficiency Comparison (Naidu, 2004) 7 Figure 3: Auction 76 Reallocation of the 'C' band (FCC, 2007b) 11 Figure 4: Revised 700 MHz Band Plan for Commercial Services (FCC, 2007c) 15 Figure 5: Revised Upper 700 MHz Band Plan Detailing Public Safety Bands (FCC, 2007d) 15 Figure 6: Regional Economic Area Groupings (FCC, 2007) 22 Figure 7: Economic Areas (FCC, 2007) 23 Figure 8: Cellular Market Areas (FCC, 2007) 23 iv 1 CHAPTER ONE INTRODUCTION Proposal This study will research what possible effect the auction of the 700 MHz spectrum will have on cellular use and technologies within the United States and its territories. Background In February 2006, the Digital Television Transition and Public Safety Act of 2005 was signed into law requiring that after February 17, 2009, only digital television signals will be legal. In the same law a requirement was set that the spectrum freed by not transmitting analog signals will be auctioned off no later than January 28, 2008 (The Act was a section of the Deficit Reduction Act of 2005). As many broadcasters were given digital channels in addition to their current analog channels and the fact that several digital channels can be transmitted using the same frequency range as one analog channel, there is over 100 MHz being ‘opened’ up due to the shift to digital television (one standard analog channel uses 6 MHz which equates to 1 high definition digital channel or approximately 6 standard definition digital channels). This bandwidth is viewed as the last chance for a company without a national cellular footprint to create one. The auction is known as FCC Auction 73. Auction 76 is a secondary auction to handle any licenses that were not won under Auction 73 with different requirements. Sub-topics - Analysis of the decision of the FCC to require open access for devices and applications but not services and networks - Analysis of the benefits hoped to be derived from the creation of the first responders network Importance of the Study The result of this FCC auction will have a significant effect on nearly every American. This study is to educate the public on how the auction could proceed and the possible consequences. People can then act on this information to write to companies or the FCC to express their opinions. 2 Methodology The methodology used to develop this paper will include a review of relevant law, auction policies, public statements made by businesses and reviews in publications made by experts in the telecom industry relevant to the main thesis. 3 CHAPTER TWO LITERATURE REVIEW The literature review will include three areas; (a) significance of the spectrum to mobile network providers / digital broadcasters, (b) current efforts to test technologies that will be used once the analog stations cease transmitting, and (c) discussion of the FCC Auction 73 format and how the format could affect the spectrum bidding. The transition from analog to digital television has been spurred by congressional actions to reclaim spectrum currently used for analog television signals. That spectrum would not be required once more efficient digital signals are used (one analog channel uses 6 MHz which can be used for either one High Definition digital channel or six standard digital channels) (Kruger, 2005). The Digital Television Transition and Public Safety Act of 2005 (“DTV Act”) requires that all full power over-the-air analog television channels cease broadcasting no later February 17, 2009 (FCC). Signals in the range 698-806 MHz (analog television channels 52-69 – known as the ‘700 MHz band’) will shift from television to commercial / public safety use. 24 MHz of the above bandwidth was previously auctioned in 2005. The structure of the bandwidth and licensing for the resultant auction of 60 MHz (24 MHz has been set aside for public safety) was defined October 5th and the auction will be held January 24, 2008. The 700 MHz band is viewed as the last major spectrum auction for the foreseeable future. Due to the benefits of lower frequencies it has been considered some of the best spectrum for wireless use though until now was unavailable for wireless systems due to analog television (Levin, 2007). Significance of the Spectrum Market Growth Data consumption on wireless networks around the world is increasing at a rate of almost 400% per year (Perez, 2007). Nearly 3 billion people have cellphones - double the number of televisions in the world and triple the number of people with Internet access (OpenHandsetAlliance, 2007). Verizon Wireless accounts for 41 percent of parent Verizon’s total revenue for 2006. Revenue from wireless accounts is increasing more than 10% every year and Verizon expects wireless revenue to grow 20% this year (Bhatmuley, 2005). 4 Unfortunately, the amount of spectrum available for new technologies to take advantage of this exploding market is practically nil. Though spectral efficiency is improving, the increase in wireless data consumption is greater. Advantages for wireless providers in the 700 MHz spectrum Licensed Spectrum. While the entire spectrum is not licensed (some frequencies are ‘open’, e.g. frequencies used by garage door openers), licensed spectrum is highly desirable because it limits the potential for interference from unknown sources (Flannery, 2007). Interference is extremely important to consumers who will be paying for services who wish to use a service when they want it. Signal Propagation. Frequencies currently used by some of the major telephone cellular companies can be seen in the table below. FCC Auction 73 will provide the lowest frequencies yet assigned for cellular / advanced wireless use. Lower frequencies have the advantage of travelling further and being better able to penetrate buildings and operate in bad weather. Wireless Watch (2006) states this as “The lower the number of cycles per second, the further radio propagates and the more stable the signal is, allowing it to go through walls and trees, and over water, without the signal fragmenting.” Table 1: Cellular Carrier Spectrum Holdings (Flannery, 2007) Being able to penetrate buildings, foliage and rain make the 700 MHz band extremely attractive to businesses wishing to create either a ‘third pipe’ into the home (after telephone & cable) and removes line-of-sight requirements for placement of towers (Levin, 2007). A cellular tower in an urban area using frequencies in the 700MHz range can have a radius of 3.3 miles (effective coverage of 34 sq. miles) whereas a tower using 1900MHz has a radius of only 1.8 miles (effective coverage of 20 sq. miles). In rural areas coverage can extend almost 18 miles using a single tower (Aloha Partners, 2007) . Cost to install network infrastructure. With greater signal propagation, fewer transmission towers are required to cover a geographic area. This is especially important in sparsely populated areas where many businesses will not establish service due to the excessive cost and amount of time that would be necessary to recoup deployment costs (Flannery, 2007). The 700 MHz provides the best spectrum yet for cellular coverage in rural areas and for a 5 company to provide true nationwide coverage. Figure 1: Spectrum Band versus Cost Comparison (Townsend, 2007) Higher Power Levels. The FCC has set the authorized transmission power for some of the bands to be auctioned off at 50kW per channel – this is up to 50 times that normally allowed for wireless use. The possible transmission power will significantly improve the ability of groups who wish to use the spectrum for multimedia broadcasting such as video and graphics (FCC, 2007). The standard transmission power for wireless technologies per 1 MHz of spectrum is 1 kW to protect low power transmitters from interference. In order to encourage deployment to rural areas, reduce infrastructure deployment costs and encourage innovation in wireless broadband technology, the FCC increased the transmission power in the lower half 700 MHz band to 50 kW effective radiated power for wireless services (Belt, 2006). Digital television signals currently being transmitted in the 700 MHz band are transmitting at 1000 kW (FCC, 2007). Wireless services have lower transmission power requirements than television broadcasters due to cellular technology which involves short line-of-sight communications with frequency reuse across small geographic areas whereas television stations broadcast a single frequency across an entire city from just a few points. Spectrum availability. The big four cellular companies - AT&T (formerly Cingular), Verizon, Sprint and T-Mobile - currently control most of the spectrum allotted to cellular use. A smaller cellular company or a start-up has had little chance of creating a nationwide footprint without dealing with one of the four major brands identified above and in Table 1. FCC Auction 73 creates the possibility that a ‘new player’ could enter the cellular market - the auction will be providing nationwide coverage and with lower deployment costs, due to the spectrum propagation, it could result in significant competition. This is seen as the last opportunity for a 6 ‘new player’ to get spectrum directly from the government rather than through a series of mergers / buyouts. With the cellular market heating up, cellular companies may look to invest in the spectrum not for their own use but simply to prevent a ‘new player’. The winners of the auctions could then sub-license the spectrum as they desire while ensuring less competition. In addition to cellular telephone use, other businesses are looking to implement a ‘third pipe’ into the home to compete against both telephone and cable television. Satellite television companies such as DirecTV and Dish are looking to complement their services while others are looking at direct competition. Use. An advantage for those companies intending to use the spectrum for multimedia rather than cellular communications is the performance advantage due to less interference from the individual placing the phone against their head. The simple action of bringing a phone to one’s head can reduce reception by ~4 decibel (dB) in the 700 MHz band due to the increase in interference between the transmitter and the receiver in the phone (Note: a 3 dB decrease reduces the signal strength by a factor of 2!). Disadvantages for wireless providers in the 700 MHz spectrum Though it would appear that there is no drawback to the 700 MHz band there are disadvantages to the spectrum that may make some companies find it not worth their while. Propagation. While the propagation is normally seen as a good thing, because the signals can travel so far there are issues that the signals from one tower will interfere with other cells in the network. Solutions such as designing the lobes of the transmissions to not overlap or using software to determine the strongest signal (and disregard the other) will increase overall deployment costs and decrease the viewed cost advantage. Bandwidth Holdings. Several companies have extensive bandwidth already and see no need for additional bandwidth that could cost them billions of dollars. Technology. Several companies are focusing more on creating more efficient technology (e.g. a third generation mobile communication standard such as. EV-DO can be up to 35 times more efficient than a second generation mobile communication standard such as GPRS (Flannery, 2007) using the same amount of spectrum. It is much less expensive to upgrade an existing system than to build out a new one. 7 Figure 2: Data Spectral Efficiency Comparison (Naidu, 2004) Cost. The expected costs will be significant running from hundreds of millions for the top cities to billions for nationwide coverage. In addition to the spectrum licenses, while the characteristics of the 700 MHz band will result in much lower capital expenditures to implement a nationwide infrastructure than higher frequencies, the actual capital expenditure will still be significant and out of the league of all but the major players. Planned Usage of the 700 MHz Band In order for companies to decide whether they should bid for the spectrum they need to know (a) restrictions imposed by the FCC on the winner of the auction, (b) how the spectrum will be allocated and how much it is expected to cost, and (c) what does the company intend to do with the spectrum once it has been won. The answers to (a) and (b) were provided October 5th when the FCC issued the auction guidelines and will be discussed below. A company’s answer to (c) will determine how it reacts to (a) and (b). Industry Positions Mobile telecommunications companies. (Verizon, AT&T, T-Mobile, Sprint-Nextel, et al) telecoms (telephone companies) have a couple of options – use the additional spectrum to increase coverage and spectral efficiency of their current voice communications or expand offerings to consumers by providing mobile television, web browsing, music, etc. The ability to provide mobile broadband communications to consumers vice simply cellular data is one of the greatest possibilities the 700 MHz band provides. 8 It is important to understand that cellphones that will be used in the 700 MHz bands will not be limited to 700 MHz. Like today’s phones which are likely quad-band, if multiple frequencies are available in the area they are operating in, the phone selects the frequency with the strongest signal to operate on. This means that 700 MHz networks do not have to cover an entire area 100 percent, but just enough to provide the spectrum owner with enough coverage across all of their spectrum holdings for a geographic area to ensure steady and reliable communications. Cable companies. (Time Warner, Cox, Charter, Comcast, et al) Cable broadcasters are looking at being able to connect entire areas without expensive cabling. With many cable companies now offering ‘complete’ packages of phone, cable and internet broadband, the ability to quickly tap into a new market with minimal infrastructure at lower capital expenditure is extremely tempting. Satellite companies. (Dish, DirecTV) Satellite TV providers wish to be able to complement their nationwide satellite footprint with local broadcasts. Due to transmission delays to a satellite (the 45,000 mile round trip takes ~0.5 seconds), satellite providers wishing to provide true all-round broadband including services/programs that require instantaneous responses (think on-line multi-player games) require a local point of presence. In the FCC AWS-1 auction in 2006, the satellite companies bid heavily early on, but then dropped out when it appeared they would be unsuccessful in obtaining nationwide coverage. The 700 MHz Band auction is the final chance to get licensed nationwide coverage for the foreseeable future. System developers. Other companies, notably Qualcomm and Aloha Partners have been investing in mobile technologies which they intend to license to the winners of the 700 MHz licenses. Services MediaFlo. MediaFlo is Qualcomm’s answer to the question “How can large-scale delivery of high-quality multimedia to wireless devices be implemented profitably?” (Qualcomm, 2007). MediaFlo provides 19 channels of real-time streaming data (14 national content / 5 local content) at 320x240 resolution within a 6 MHz pipe. For reference, standard analog television is transmitted at a resolution of 330 horizontal lines. Qualcomm has licensed MediaFlo to several companies for possible use and is currently being trialed by Verizon as their V CAST TV which is being tested in many cities across the United States (over 20 major markets). Table 2 shows the projected advantages of using a channel in the 700 MHz range transmitting at full power (50 kW) vice other frequencies currently used for wireless services. 9 Table 2: Potential Frequency Bands for Multimedia Distribution (Qualcomm, 2007) HiWire. After scooping up a significant chunk of the 700 MHz spectrum in the 2006 auction, Aloha Partners’ subsidiary HiWire began plans to implement mobile digital television with testing in Las Vegas. HiWire provides 24 channels of entertainment. Though HiWire provides more channels than MediaFlo, HiWire took longer to acquire a new channel compared to MediaFlo (5 seconds vice 2) (Ziegler, 2007). HiWire’s test in Las Vegas is being fielded by T-Mobile. Failed ventures. Not all attempts to make it in the mobile video market have succeeded. The problem for companies starting a mobile video system is getting consumers to pay for content that they already have likely paid for at home. Modeo. Several years ago, Crown Castle (largest owner of cellular towers across the United States) attempted a mobile video service but failed to attract an audience (Abel, 2007). Movio. In the United Kingdom, Virgin Mobile and British Telecom (BT) joined forces to create a mobile television service name Movio. Movio failed to attract more than 10,000 subscribers. The joint venture also failed to get the backing of the manufacturers as only a single cellphone model was capable of receiving the signal. This case shows that the backing of the manufacturing industry is necessary to succeed as well as being able to attract an audience (Reiter, 2007). 10 FCC Auction 73 Important dates for FCC Auction 73: − January 24, 2008: Auction commences − June 30, 2008: FCC must deposit all funds from auction into US Treasury − February 19, 2009: Statutory deadline for TV broadcasters to vacate the band License Period. 10 years starting February 17, 2009. License Types. Auction 73 / 76 will use four different types of licenses: − Regional Economic Area Groupings (REAG) – 12 Licenses − Economic Areas (EA) – 176 Licenses − Cellular Market Areas (CMA) – 734 Licenses − Nationwide – 1 License Maps of each license area and descriptions of the types can be found in Appendix A. The FCC expects Auction 73 to bring in between $10-$15 billion to the US Treasury. The expected revenue to be generated from the sale of the spectrum was based on a previous auction in 2006 called AWS-1 (Advanced Wireless Services Auction 1). The frequencies associated with AWS-1 were in the 1100 and 2100 MHz bands, due to the benefits of lower frequencies described above, many expect the actual revenues of the 700 MHz band auction to be much higher. Table 3: Estimated 700 MHz Band Market Value Based on AWS-1 Bids (FCC, 2007b) The estimated values in Table 2 above are now the reserve prices for the licenses to be auctioned. If the auction fails to meet the reserve price, then the FCC will reauction the spectrum (Auction 76) within 3 weeks of the closure of Auction 73 with revised spectrum allocation (see Figure 3). Due to the processes involved in the type of bidding, Auction 73 is expected to take approximately 30 days. Prior to the final rules being issued October 5th, 2007 by the FCC, there were several months of intense lobbying by all interested groups as to how the spectrum should be allocated (size of the bands), how the licenses should be allocated (across geographic areas) and what 11 requirements will be levied on the winners of the licenses. To understand how companies might bid, one needs to understand how the spectrum is broken up into ‘blocks’ and the licensing models applied within each block. Upper Band Block C. The license of highest interest so far for FCC Auction 73 is the ‘C’ band in the upper 700 MHz band (22 MHz of paired frequencies) which will be licensed as REAG with 12 nationwide licenses (see Appendix A for map). The 12 licenses are broken into three packages, the 50 states, Atlantic region and Pacific region. Bidders have the option of bidding on either one of the twelve individual licenses or one of the packages. At the end of each round, the provisionally winning bid will be determined by taking the highest bid for each individual region within a package and comparing it to the highest bid for the package. If the sum of the individual bids is greater than the package bid, the provisional winners are for each region, whereas if the package bid is higher than the sum of the individual regions, the provisional winner is the package bidder. Given that the reserve price for the upper 700 MHz ‘C’ band is $4.6 Billion and it contains a package covering the entire 50 states (and only 8 licenses), the bidding will be intense. Should the reserve not be met (highly unlikely), the follow on auction would break the 22 MHz into 2 bands, a 10 MHz and a 12 MHz band (see Figure 3). The important fact is that the new C1 band would be licensed as EAs vice REAGs. It should be noted that REAGs are designed within the continental 48 states to have an equal percentage of the population (~50 million people each). Figure 3: Auction 76 Reallocation of the 'C' band (FCC, 2007b) Lower Band Bocks A & E. Two blocks in the lower 700 MHz band will be auctioned off as Economic Areas (EA) – blocks A and E – which have 176 licenses across the United States and its territories. While both block A and E are EA they will be bid in completely different ways due to the allocation of each block. Block A is a paired license whereas block E is an unpaired single 6 MHz band. Pairing is extremely important within communication systems. Licenses are paired to provide a separate frequency band for upload and download. The separation allows technologies to make maximum use of the frequency. The technology to spread signals across a band of frequencies has improved dramatically over the past few years 12 and in the case of two-way cellular communications would not be possible without paired spectrum. Because block E is unpaired, it is not viewed as quality spectrum for communications requiring two-way signal flow – i.e. for mobile telecommunication providers – as broadcasts are transmit only and do not have a need for an equal sized pipe from consumers back to the broadcast site. For mobile video providers however, it is seen as perfect spectrum due to the higher transmission levels allowed and less likely competition from cellular providers. Lower Band Block B. Another hotly contested band will be the ‘B’ block in the lower 700 MHz band. The ‘B’ block is configured as Cellular Market Areas (CMAs). CMAs are comprised of both metropolitan areas and rural areas. The reason that EAs and CMAs are licensed in addition to or rather than a single national license or REAGs is that small to medium companies can’t compete against the larger companies where spectrum might cost hundreds of millions or even billions of dollars. By creating small licenses, local operators can win licenses just for the areas they wish to provide service for. If a bidder wins the 50 state package license for the upper ‘C’ block they will need to provide services to Hawaii and Alaska! They are many small companies with licenses today who could expand or improve their footprints by winning one or a few licenses. In addition, licenses for many rural areas were not purchased in previous auctions. Due to the benefits of signal propagation for 700 MHz band, small licenses for rural areas have a better chance than in any previous auction. Smaller licenses will also allow companies with near nationwide coverage to ‘fill in the gaps’ without purchasing licenses for areas which they already have coverage. Upper Band Block D. The final type of license in FCC Auction 73 is the nationwide license. This may sound as if it would be the best license in the auction with 10 MHz of paired spectrum but it may be the only license that does not get sold. At issue are the requirements imposed on the winner of the block. In order to facilitate a nationwide public safety broadband network, the FCC has decided that it is in the interests of the public safety users to have a nationwide system created, installed and maintained by a commercial organization rather than having the United States government try to design and build it itself. To encourage companies to bid on the ‘D’ block, the FCC is allowing the winning bidder to use the 24 MHz of public safety spectrum for its own purposes during times when public safety does not need the spectrum. Conversely, if public safety should need more spectrum during a crisis, they can tap into the 10 MHz on the private side. While winning the nationwide coverage allows a business to have a single spectrum covering the entire country and its territories, this creates several problems as well as opportunities. Perhaps the biggest advantage is that by building out the public safety network, they have a guaranteed ‘anchor tenant’ position within police and fire departments across the country (Anderson, 2007b). 13 The biggest drawback is the cost to build the public safety broadband network. As the specifications for the network have not yet been finalized, a winning bidder may not have the resources available to create a nationwide network. Build-out Requirements To ensure that auction winners make use of the spectrum and do not hold the spectrum against new entrants to their markets, the FCC has set construction requirements that the winners must comply with or else have their license period reduced or the licenses withdrawn altogether. For all but the nationwide private/public partnership there are interim and final requirements. CMA and EA licenses must provide coverage to 35 percent of the geographical area by 2013 and 70 percent by 2019 (the percentages increase to 40 and 75 for any licenses sold in Auction 76). REAG license coverage is mapped to the same geographic areas as EAs. REAG licenses must cover 40 percent of the population within each EA it covers by 2013 and 75 percent of the population by 2019. If the interim requirement is failed to be met, the license will expire 2 years early (2017). The most stringent build-out requirement applies to the public safety spectrum. The winning bidder must cover 99.3 percent of the population by 2019 (FCC, 2007a). Lobbying Google. Google is a software development company that hopes to create and deploy mobile applications. Companies providing internet / mobile services have recently been authorized to begin tiered service (failure of network neutrality regulation) – this means that companies can decide not to allow specific content to their users or even specific websites. To ensure that the new spectrum would not be encumbered by monopolistic practices, Google requested the FCC adopt the following policies: Consumers should be able to download and utilize any software Open applications applications, content, or services they desire Consumers should be able to utilize a handheld communications Open devices device with whatever wireless network they prefer Third parties (resellers) should be able to acquire wireless Open services services from a 700 MHz licensee on a wholesale basis, based on reasonably nondiscriminatory commercial terms Third parties (like internet service providers) should be able to Open networks interconnect at any technically feasible point in a 700 MHz licensee's wireless network Table 4: Google License Condition Requests (Google, 2007) To encourage the FCC in selecting the ‘open platform’ license requirements for Auction 73, Google stated that it would guarantee the reserve price for the largest spectrum block (the ‘C’ spectrum of the Upper 700 MHz Band – see Figure 4) of $4.6 Billion. In October 2007, the FCC accepted the proposals for open applications and open devices but stopped short of open services and networks. While Google has not yet stated if it will participate in Auction 73 having failed 14 to get all of its requests accepted, the FCC has stated that if the reserve price is not met in Auction 73, Auction 76 will be run without either of the open limitations (applications and devices) (FCC, 2007b). Google’s concern is that the major wireless providers are also the major wireline providers. Recent examples such as Comcast delaying/restricting BitTorrent traffic, Verizon blocking text messaging to a specific political group and AT&T censoring a musical performance with political overtones have shown that companies have no problems controlling the data that goes through their equipment. Many executives in the telecom industry have openly stated they feel it is their right to control what goes though their pipes. Google, on the other hand, believes that if people pay for a service (broadband) they should be able to use it for any purpose they desire. Cyren Call. In 1998, Congress mandated that 24 MHz of the digital television transition spectrum be devoted to public safety. Last month, Cyren Call was selected to be the advisor to the Public Safety Spectrum Trust Corporation for the 700 MHz public safety auction (O’Regan, 2007). Cyren Call has been working to ensure that the public safety spectrum can be used for broadband applications and not solely voice. This would require the private partner to create a data network in addition to a voice network. The ability of the private partner to use the 24 MHz public safety spectrum (in addition to the 10 MHz they won for their ‘D’ block) represents 34 MHz that could be used for an advanced system. The question then is how do you explain to your consumers that they will lose service when there is a public service need which will knock non-public safety users off the air? 15 The results of the intense lobbying and decisions by the 5 FCC commissioners have resulted in the auction described above and displayed in Figures 4 and 5. Figure 4: Revised 700 MHz Band Plan for Commercial Services (FCC, 2007c) Figure 5: Revised Upper 700 MHz Band Plan Detailing Public Safety Bands (FCC, 2007d) 16 CHAPTER THREE ANALYSIS AND DISCUSSION FCC Auction 73 will have a significant effect on nearly every American – maybe not immediately – but within several years. The advantages that the spectrum has to broadcast vast amounts of data nationwide will change the way that many people get their news and information. The public safety band will ensure that our first responders can all communicate and be more effective. Who is willing to pay? Will the telecom companies try to win the spectrum during Auction 73 when the open requirements are imposed or will they hope that no one buys the spectrum and then attempt to purchase the spectrum in Auction 76 when the requirements for open applications and devices are removed? In 2001, After AT&T spun off its wireless business unit, AT&T focused on landline communications. In 2007 with wireless technologies expanding, AT&T purchased Cingular which had in the interim purchased AT&T Wireless. In October 2007, AT&T purchased Aloha Partners’ 700 MHz spectrum assets for $2.5 Billion in cash (Aloha Partners paid only $29 million for the licenses at auction in 2004!), AT&T acquired licenses which are located in UHF channels 54 and 59 covering 196 million people in 281 markets including 72 of the top 100 metropolitan areas and all of the top 10. With its recent acquisitions, AT&T now states that they have sufficient spectrum resources for their needs and do not intend to participate in the auction. While they may not appear to need the spectrum, they may bid on those markets which the purchase from Aloha Partners did not provide to get a true and complete nationwide system. Sprint has recently spent a lot of money purchasing spectrum in the 1.9 GHz and 2.5 GHz bands and expanding its networks both geographically and technically. Like AT&T, Sprint stated that it has no intentions to participate in the auction due to tasks they are committed to which will draw upon their cash though they have been very active in attempting to set the requirements for the auction (Levin, 2007) Although they are the nation’s largest wireless provider, Verizon has made it known that they will be bidding heavily, not only to increase its bandwidth holdings for future growth but also to keep out new entrants. Verizon even filed a lawsuit to overturn the FCC decision to require open devices and applications in the upper 700 MHz ‘C’ band, though dropped the lawsuit when the court refused to expedite the case (would not be heard before the auction) (Bangemen, 2007). 17 Telecommunications is a business and to that end the businesses report to their shareholders. To maximize profits, the telecommunication and cable companies limit the choice that consumers have in order to extract higher fees. As the largest wireless companies in the United States are also the largest wireline companies, there are few true options for most Americans. By opening the spectrum to all devices and applications, consumers will be able to purchase the phone of their choice rather than being limited to a select few models (Note: this would allow the Apple iPhone, currently tied to the AT&T cellular network, to be used on any network in the band). Open applications means that consumers can download whatever they desire without fearing that the company providing the service will restrict certain services. This is excellent news for consumers and should spur mobile and advanced wireless technology development. This is where Google comes in. Google previously offered up nearly $5 billion to purchase the ‘C’ band in the upper 700 MHz spectrum in order to ensure that the spectrum could be used without restrictions. While Google may still bid and win the spectrum, it is worth it? As the 700 MHz is a new band for wireless communications, a new network would need to be built with new base stations (towers could be reused) that could cost approximately $5 billion! This almost guarantees that only the major wireless players could compete. In addition, as with all networks and technologies there are limits to not only the number of simultaneous users but also in the distance from a cell tower one must be in order to receive true broadband connectivity. Between now and the auction, many companies will be trying to determine if they can afford the solution. The biggest winners in the auction though may be some who will not even be bidding. Mobile technology hardware companies such as Motorola, Nokia, Sony-Ericsson, Lucent et al will profit handsomely as the 700 MHz band will require completely new hardware for all services. Every model of every phone sold in the United States will be redesigned to not only use the 700 MHz band (new quint-band phones!) but also will likely feature newer and larger screens to take advantage of the broadband video that will be available. As with many new technologies, early adopters can make it big, find a small niche or find no market at the time of testing. Several companies have tried mobile broadcasting but failed to find a sufficient market. Mobile television will eventually take off, but will it be simply broadcast or interactive? Long program format (30 minutes/1 hour) or short videos? An ironic twist in the saga of the analog television transition is that the television broadcasters are releasing the spectrum they are currently using for digital television so that it can be used for… digital television by the mobile communication companies. Currently and in the near future, consumers will need to pay for both digital television in the home and digital television on the road via their mobile device. A future goal, perhaps through additional media mergers is that home and mobile digital television will relink and consumers need purchase only a single plan and be able to watch wherever and on whatever device they desire. 18 CHAPTER FOUR CONCLUSION When FCC Auction 73 licenses expire on February 17, 2019, the United States will have seen a shift in wireless technologies hopefully equivalent to the transition in the aviation industry from propeller aircraft to jet engine aircraft. Consumers will be using advanced wireless devices and services in ways not even thought of today perhaps by companies not even in existence today. Rural residents will have wireless capabilities equal to those living in cities. First responders will have a broadband network that allows them to communicate effectively and efficiently across different units and organizations to protect us from whatever may happen. And consumers will have choices in what information they receive and on which device they receive it. If the above statements are realized then the FCC will have succeeded in creating an auction that changed a society. 19 REFERENCES Abel, J. (2007, July 26). The End of Modeo. Retreived November 9, 2007 from http://www.blogabelism.com/2007/07/the_end_of_modeo.html. Albanesius, C. (2007, July 31). New FCC Spectrum Rules Win Google's Nod. Retrieved October 11, 2007 from http://www.pcmag.com/article2/0,1895,2164661,00.asp. Anderson, N. (2007a, July 31). FCC sets 700MHz auction rules: limited open access, no wholesale requirement. Ars Technica. Retrieved November 11, 2007 from http://arstechnica.com/news.ars/post/20070731-fcc-sets-700mhz-auction-rules-limited- open-access-no-wholesale-requirement.html Anderson, N. (2007b, August 15). 700MHz auction: What's really up for grabs, and why it won't be monopolized. Ars Technica. Retrieved October 9, 2007 from http://arstechnica.com/news.ars/post/20070815-700mhz-auction-whats-really-up-for- grabs-and-why-it-wont-be-monopolized.html Bangeman, E. (2007, October 24). Let open access reign: Verizon relents on legal challenge to FCC. Ars Technica. Retrieved November 11, 2007 from http://arstechnica.com/news.ars/post/20071024-let-open-access-reign-verizon-relents-on- legal-challenge-to-fcc.html. Bhatmuley, S. (2005, May). Convergence: Commercial Deployment of Wireless Systems. Retrieved November 5, 2007 from http://www.itu.int/ITU-D/imt- 2000/documents/Nairobi2005/Presentations/Day3/Nairobi_3_2_3.pdf Digital cable. (2007, October 12). In Wikipedia, The Free Encyclopedia. Retrieved October 12, 2007 from http://en.wikipedia.org/w/index.php?title=Digital_cable&oldid=163960614. Federal Communications Commission. (2007a, October 5). Auction 73: 700 MHz Fact Sheet. Retrieved November 10, 2007, from the World Wide Web: http://wireless.fcc.gov/auctions/default.htm?job=auction_factsheet&id=73. Federal Communications Commission. (2007b, October 5). AUCTION OF 700 MHz BAND LICENSES (AUC-07-73-B (Auctions 73 and 76)). Washington, DC: U.S. Government Printing Office. Retrieved October 8, 2007, from the World Wide Web: http://fjallfoss.fcc.gov/edocs_public/attachmatch/DA-07-4171A1.pdf. 20 Federal Communications Commission. (2007c, September 5). Revised 700 MHz Band Plan for Commercial Services. Washington, DC: U.S. Government Printing Office. Retrieved October 6, 2007, from the World Wide Web: http://wireless.fcc.gov/auctions/data/bandplans/700MHzBandPlan.pdf. Federal Communications Commission. (2007d, August 10). SECOND REPORT AND ORDER. Washington, DC: U.S. Government Printing Office. Retrieved October 8, 2007, from the World Wide Web: http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-07- 132A1.pdf. Flannery, S., Edelson, V., Ittel S., Telecom Services: 700 MHz Primer: Beachfront Property for Sale. Morgan Stanley. February 14, 2007. Retrieved October 10, 2007 from http://www.alohapartners.net/images/Aloha_Content/Morgan%20Stanley%20700MHz% 20Analysts%20report%202-07..pdf Google. (2007, July 20). Google Intends to Bid in Spectrum Auction If FCC Adopts Consumer Choice and Competition Requirements. Retrieved October 8, 2007 from http://www.google.com/intl/en/press/pressrel/20070720_wireless.html High-definition television in the United States. (2007, October 9). In Wikipedia, The Free Encyclopedia. Retrieved 22:31, October 12, 2007, from http://en.wikipedia.org/w/index.php?title=High- definition_television_in_the_United_States&oldid=163215019 Kruger, L., Moore, L. (2005, August 12). The Digital TV Transition: A Brief Overview. Congressional Research Service - The Library of Congress. Retrieved October 28, 2007, from http://www.opencrs.com/rpts/RS22217_20050812.pdf. 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Retrieved November 5, 2007, from http://www.engadgetmobile.com/2007/09/25/hiwires-las-vegas- dvb-h-trial-reviewed/. 22 APPENDIX A FCC AUCTION 73 / 76 LICENSE MAPS Figure 6: Regional Economic Area Groupings (FCC, 2007) 23 Figure 7: Economic Areas (FCC, 2007) Figure 8: Cellular Market Areas (FCC, 2007) 24 CMA - Cellular Market Areas CMAs consist of the following: MSA Boundaries - Metropolitan Statistical Areas: A geographic area defined by the Office of Management and Budget and modified by the FCC. There are 306 MSAs, including New England County Metropolitan Areas and the Gulf of Mexico Service Area (water area of the Gulf of Mexico, border is the coastline). and, RSA Boundaries - Rural Service Areas: A geographic area used by the FCC to define coverage of spectrum licenses in certain services. There are 428 RSAs, which, when combined with 306 Metropolitan Statistical Areas (MSAs), comprise the 734 cellular geographic service areas. EA - Economic Area A geographic area established by the Bureau of Economic Analysis of the Department of Commerce and used by the FCC to define the coverage of spectrum licenses for certain services. There are 172 EAs, plus three EA-like areas, encompassing the Northern Mariana Islands, Guam, American Samoa, the United States Virgin Islands and Puerto Rico. EAG - Economic Area Grouping EAGs (220 MHz and 700 MHz) are geographic areas based on groupings of EA boundaries used for licensing in the 220 MHz, 747 to 762 MHz, and 777 to 792 MHZ bands. REA - Regional Economic Areas A geographic area based on groupings of 172 Economic Areas (EAs) and 4 EA-like areas developed by the Bureau of Economic Analysis of the U.S. Department of Commerce, used to define the coverage of spectrum licenses for certain services.
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