$30 Billion FCC Spectrum Auction in 2008 Under Threat
FCC's $30 billion auction is being challenged in Court.
WASHINGTON DC, May 24, 2007 - Satnews Daily - The upcoming bidding for 60 megahertz of analog radio spectrum set for Jan. 28, 2008—which could earn up to $30 billion for the federal government—has run into a legal roadblock.
Three small telecom companies have filed suit at the Third Circuit Court of Appeals in Philadelphia asking the $14 billion auction of wireless spectrum on the grounds held Aug. 2006 be nullified. Council Tree Communications Inc., Bethel Native Corp. and the Minority Media and Telecommunications Council allege that last-minute changes inserted by the Federal Communications Commission (FCC) made the bidding disadvantageous to them.
T-Mobile, a subsidiary of Deutsche Telekom AG, was the big winner at this auction, receiving $4 billion worth of spectrum in a sale of public airwaves once reserved for government use.
Any decision by the appeals court is bound to affect the Jan. 2008 auction where 60 MHz of analog radio spectrum will be sold. The federal government expects to pocket anywhere from $10 to $30 billion from the spectrum sale.
The FCC, which will supervise the auction, expects to reclaim a total of 108 MHz from analog TV broadcasters. Of this total, 24 MHz will not be auctioned but will be given to public-safety groups to solve interoperability problems during time of crisis involving multiple jurisdictions.
The U.S.' leading providers of Direct-to-Home (DTH) TV and the Internet's cash flow positive heavyweights have banded together to purchase spectrum that should improve their competitive positions in the booming wireless telecom business. Reports say DTH providers DirecTV and EchoStar Communications are partnering Internet giants Google, Yahoo and Skype and hardware maker Intel to bid in the auction.
A lawyer for Council Tree Communications, one of the three plaintiffs, said the FCC rule changes, almost on the eve of the auction, were disadvantageous to his clients' chances in the bidding.
One of the changes made by the FCC was to double the length of time (to 10 years) winning bidders must hold their spectrum before selling it. Analysts said 10 years is longer than the venture capitalists (who finance small bidders) like to hold their investments.
The FCC defended its auction rule changes saying they were the fair product of a fair process. An FCC lawyer said that should the appeals court voids the rules on technical grounds, the FCC would likely enact almost the same rules again.
Lawyers said the court has three choices: uphold the rules and last year's auction, vacate either the rules or the auction, or do nothing.
The 60 megahertz of spectrum up for auction in Jan. 2008 is returning to the FCC as a result of TV broadcasters' transition to digital television. Under current law, broadcasters must return their analog channels to the government by Dec. 31, 2006, but only in markets where 85% of homes can receive digital signals.
Analysts, however, believe it could take decades to meet this goal. Less than 10 million Americans have bought digital tuners that can receive digital shows via regular antennas or have special digital cable-TV boxes.
The U.S. Congress wants analog TV broadcasts shut down by Feb. 17, 2009, which will also be the start date for the national conversion to digital TV. This will end more than 60 years of analog broadcasts and will potentially make millions of analog TV sets obsolete.
Congress is eager to reclaim analog spectrum both to improve public safety radio communication, and auction it to wireless high-speed Internet services. A spectrum auction could be too expensive for DirecTV and EchoStar or other cable companies alone, hence the need to partner with Internet heavyweights with deep pockets.
A recent estimate provided to Congress predicts that just 60 MHz could net the federal government from $20 to $30 billion.
