700 MHZ BAND SPECTRUM AUCTION AND ITS EFFECT ON

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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
                         jvanfrank@yahoo.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




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                                                         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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