How AT&T, Google, and Dish Network fared in the 700 MHz auction

By Scott M. Fulton, III, BetaNews

March 21, 2008, 12:15 PM

After an enormous amount of publicity for the richest sale of publicly-held frequencies in history, the question being asked sounds like something Walter Cronkite could be heard saying: "What kind of a day was it? A day like all days..."

From a standpoint of contests -- especially the athletic and political kind -- typically the second prize winner is often forgotten. But the second prize in the US Federal Communications Commission's 700 MHz auction, which ended on Wednesday, was not exactly dinner for two at Applebee's: AT&T will pay $6.636 billion to purchase 227 licenses to deploy services nationwide on the "B-block."

The "B-block" is comprised of two segments of 6 MHz of bandwidth each, presently known as Channels 53 and 58 on your UHF TV dial. AT&T was the huge winner in the B-block auction, and had already placed provisionally winning bids (PWBs) as early as round 26 of 261. The most expensive regional license for AT&T was for conducting B-block services for customers in New York City and Newark, New Jersey, which sold for $884.7 million in round 26.

The details of the auction bids, released only yesterday by the FCC, appear to reveal that Verizon Wireless -- the big winner of C-block, with the largest chunks of contiguous bandwidth (two segments of 11 MHz each) -- may not have battled it out with AT&T after all, and vice versa. Both carriers may have agreed, or may have simply resolved among themselves, to keep their sights set on separate goals. In fact, there may never have been many real contests at all during the whole auction, despite the 261 rounds.

Google Airwaves Inc. won absolutely nothing, though according to the FCC, it never posted any PWBs. So despite the attention it helped cast on the auction, mostly for helping to incite a change in the rules making C-block winners open their networks for open access to customers' choices of devices, it may never have actually placed a meaningful bid -- meaning, one that was high enough to qualify as the highest received so far.

As little as Google ended up doing in the auction, it had little to say about the matter yesterday, either. "One thing is clear," reads a statement yesterday from two of its general counsel, "although Google didn't pick up any spectrum licenses, the auction produced a major victory for American consumers."

One other possible major victory in the works was clinched by Dish Network parent company EchoStar, whose designated bidder Frontier Wireless clinched 168 licenses for services in the E-block (UHF channel 56), for a total expense of nearly $711.9 million. With licenses spread out all over the contiguous 48 states and Alaska, EchoStar could use that spectrum to develop a quadruple-play service (wireless phone, landline phone, satellite TV, broadband Internet) that would give it a huge leg up on its competition, quintessential "hot potato" DirecTV.

In the 2006 spectrum auction, which had been the FCC's richest to date until now, DirecTV and EchoStar -- which at the time had proposed a merger -- jointly created an entity called DBS Wireless to bid on behalf of both. Though there were doubts raised as to the legality of that creation, and whether it constituted collusion, DBS ended up being outbid anyway by carriers like Verizon Wireless and Cingular, which many say were playing off of one another to drive prices artificially high, keeping DBS and others locked out.

This time, for reasons that still haven't been explained, DirecTV chose to sit out this auction, at a time when its new owners -- John Malone's Liberty Media -- need desperately to distinguish its service against not only Dish Network, but also fast-spreading fiberoptic service providers FiOS (from Verizon) and U-verse (from AT&T).

Vulcan Spectrum, led by Microsoft co-founder Paul Allen, won two licenses for A-block services in the Portland, Oregon, and Seattle-Tacoma, Washington areas, for which Vulcan will play about $112.8 million.

In a blog post this morning on Public Knowledge, Michigan University Professor Susan Crawford analyzed the auction -- particularly the C-block -- to determine how its outcome affects the direction of the telecommunications industry going forward. "The central question is which model of packetized communications will prevail," Prof. Crawford writes.

"Will we converge on a set of proprietary, walled-garden networks, in which the network provider acts as a gatekeeper by deciding which communications (in terms of content, application used, protocol used, how expensive they are) move easily across its network and onto the (authorized) handsets of users (the cellphone model), or will we converge on the Internet model, in which the network provider makes available an interconnected, commodity, nondiscriminatory transport service (essentially, a utility connectivity product) on which competitive communications travel that can be introduced without the knowledge or permission of the network provider and can be accessed via any handset?"

Her answer is the cell phone model, for now, by virtue of VZW's huge win there. And that may not be such a good thing from the point of view of FCC Commissioner Jonathan Adelstein. Yesterday, his office pointed out that of the 1,090 licenses awarded, minority- and female-owned businesses only clinched 7.

"It's appalling that women and minorities were virtually shut out of this monumental auction," he wrote. "It's an outrage that we've failed to counter the legacy of discrimination that has kept women and minorities from owning their fair share of the spectrum. Here we had an enormous opportunity to open the airwaves to a new generation that reflects the diversity of America, and instead we just made a bad situation even worse. This gives whole new meaning to 'white spaces' in the spectrum."