Criticism notwithstanding, FCC stands pat on 700 MHz auction rules

Last week, the FCC released the final rules for the upcoming 700 MHz auction. The rules proved almost identical to the rules released in August, although the auction has now been pushed back a week to 24 January 2008. The lack of major changes is an indication that Verizon, Frontline Wireless, and a host of small business owners are not going to see the changes they wanted, changes which would have lowered build-out requirements and gut the “open access” provisions that govern part of the spectrum. Arstechnica’s Nate Anderson writes that the House Committee on Small Business hosted a hearing earlier in the week on how the auction rules would affect small business, and Christopher Guttman-McCabe from CTIA (the wireless trade group) was on hand to complain. The 700 MHz rules are designed to make small businesses competitive bidders over a portion of the available 60 MHz of spectrum, but Guttman-McCabe charged that the rules would actually hinder such businesses from participating.

22 MHz of spectrum is grouped together as a set of large licenses with open access rules on them, generally designed for a large company to pick up a national swath of spectrum. Another block of spectrum is set aside for a Public Safety Partnership that will require the winner to build a national network to public safety specifications. Both requirements are not conducive to small business. The FCC, however, broke the rest of licenses into smaller groups which are more attractive to regional wireless firms. The rules, alas, also come with tough build-out requirements. FCC Chairman Kevin Martin, who also spoke at the hearing, told the committee that they were “the strictest build-out rules ever implemented for wireless services.” In the CTIA’s view, this is exactly the problem. The rules call for license winners to cover 35 percent of their geographic area within four years, and 70 percent within ten years. Guttman-McCabe pointed out that many small wireless companies operate in rural areas, which may be sparsely populated. “More than 87 percent of the population lives on just eight percent of the geography,” he said. “We think it makes little sense to emphasize the coverage of geographic areas where no one resides.” Note that CTIA also dislikes the open access rules, which would enforce a “no locking and no blocking” directive on wireless carriers. Any safe device could be used across an open network, and it could run any safe application. This rule serves the interests of companies such as Skype, but CTIA argues that the ability to control devices is crucial for “security, quality, and viability of [a] wireless network.”

Anderson’s prediction: Open access will proceed unless Congress tries to intervene. Not only small businesses, but big telcos, too, might find the open access provision unattractive and try instead to gobble up national spectrum by piecing together a string of small licenses. “Such a move could lower the overall bid price for the open access block and also limit the spectrum available to small firms,” Anderson concludes.