Jul 31, 2007 (03:07 PM EDT)
Google, Others Mull Next Steps In Race For 700 MHz

Read the Original Article at InformationWeek

In approving rules for the upcoming 700 MHz spectrum auction Tuesday, the FCC made major strides towards opening the auction in a way that could lead to more consumer choice, but stopped short of guaranteeing the key provision of wholesale open access.

The rules, which are expected to be published within a few weeks, immediately drew praise from some quarters and scorn from others.

Google, which had captured much of the attention going into the meeting, was disappointed that just two of the four conditions it had set to participate in the auction were approved by the FCC.

Richard Whitt, Google's Washington Telecom and Media Counsel, said in a press conference immediately following the FCC meeting that there were some "real benefits" in the new rules, but he noted that only two its conditions were met by the FCC. He said the search engine firm needs "time to study" the rules when they are published before it will make a decision on whether it will bid $4.6 billion in the auction.

He cited what he called an "incumbent blocking premium" in which incumbent firms could pay more than the value of spectrum. In such cases, new entries into a market can be blocked by incumbents.

Also following the vote, Meg Whitman, president and CEO of eBay, hailed "openness" provisions and said the firm is encouraged by the FCC vote. The firm's Skype VoIP (voice over Internet protocol) provider has a stake in the outcome of the auction.

"We believe that ensuring greater choice for wireless devices and applications is a very positive development and we are very pleased that 'Carterphone' principles are now part of the Commission's spectrum policy. We will continue to work with the Commission to make openness a guiding principle throughout the broadband Internet access marketplace," Whitman said. The landmark Carterphone decision of 1968 set the precedent for the use of foreign devices on AT&T's network.

Skype and Google have supported the so-called "openness" principle in the 700 MHz auction. The major mobile phone providers, AT&T and Verizon Wireless, have cautiously moved toward supporting some open features of the auction in recent weeks.

Network equipment supplier Cisco Systems hailed the FCC action including provisions calling for the establishment of a nationwide allocation of spectrum for public safety use.

FCC chairman Kevin Martin broke the logjam on the auction a few weeks ago when he proposed some degree of openness. At the FCC meeting Tuesday, his proposals were essentially followed, although individual commissioners voiced some strong alternate opinions of their own on the auction rules.

For instance, commissioner Robert M. McDowell dissented partially from the commission decision. "I am disappointed that the majority didn't try to work with industry to forge a consensus solution rather than rushing to regulate without thinking through possible unintended consequences," he said

He worried that smaller players -- especially rural companies -- wouldn't have the resources to match the "higher bids of the well-funded giants." McDowell added: "Depriving the nascent 700 MHz market place of smaller new entrants will result in less innovation and competition, not more."

Consumer groups expressed reservations after the FCC meeting, particularly over the lack of approval over the failure to guarantee wholesale open access, which would have required licensees to sell access to the network to alternate providers on a wholesale basis. The Open Internet Coalition said it was disappointed that wholesale open access hadn't been approved. Approval of the measure would likely have paved the way to a third broadband pipe for consumers.

Gene Kimmelman, vice president for federal affairs for Consumers Union, said of the FCC action: "It's a small benefit way off in the future that conceals a really blown opportunity to bring prices dramatically down and increase broadband speeds enormously through competition."

The auction, scheduled to be held in January, won't likely have any impact on the marketplace until 2010 after winning bidders complete their network infrastructure and consumer devices.