United States 2008 wireless spectrum auction
Encyclopedia
The United States 700 MHz FCC wireless spectrum auction
, officially known as Auction 73, was started by the Federal Communications Commission
(FCC) on January 24, 2008 for the rights to operate the 700 MHz frequency band in the United States
. The details of process were the subject of debate among several telecommunication
s companies, including Verizon Wireless
, AT&T
, as well as the Internet company Google
. Much of the debate swirled around the "open access" requirements set down by the Second Report and Order released by the FCC determining the process and rules for the auction. All bidding was required by law to commence by January 28.
.
Original usage
The 700 MHz spectrum was previously used for analog television broadcasting, specifically UHF channels 52 through 69.
The FCC has ruled that the switch to digital television has made these frequencies no longer necessary for broadcasters, due to the improved spectral efficiency of digital broadcasts. Thus, all broadcasters will be required to move to channels 2 through 51 as part of the digital TV transition. This reallocation is an ongoing effort; the lower channels of the band, 52 through 59, have been used considerably more for analog and digital broadcasts than the upper channels, 60 through 69, which have been largely abandoned.
Some of the 700 MHz spectrum was already auctioned in Auctions 44 and 49. Channels 54, 55 and 59 were sold and in some areas are already being used for broadcasting and Internet access. For example Qualcomm MediaFLO
in 2007 started using Channel 55 for broadcasting TV to cell phones in New York City, San Diego and elsewhere.
The FCC’s original proposal allowed only nine package bids: the six 30 MHz regional bids and three nationwide bids (10, 20, or 30 MHz). Although these nine packages were consistent with the expressed desires or many prospective bidders, others felt that the nine packages were too restrictive. The activity rule is unchanged, aside from a new definition of activity and a lower activity requirement of 50%. A bidder must be active on 50% of its current eligibility or its eligibility in the next round will be reduced to two times its activity. Bids made in different rounds were treated as mutually exclusive and a bidder wishing to add a license or package to its provisional winnings must renew the provisional winning bids in the current round.
The FCC placed important rules on public safety for the auction. 20 MHz of the valuable 700 MHz spectrum were set aside for the creation of a public/private partnership that will eventually roll out to a new nationwide broadband network tailored to the requirements of public safety. The FCC offered the commercial licensee extra spectrum adjacent to the public safety block that the licensee can use as it wants. The licensee is allowed to use whatever bandwidth that is available on the public safety side of the network to offer data services of their own.
, groups such as Public Knowledge
, MoveOn.org, Media Access Project
, along with individuals such as Craigslist
founder Craig Newmark
, and Stanford Law professor Lawrence Lessig
appealed to the Federal Communications Commission
to make the newly freed airways open access to the public.
Prior to the bidding process, Google asked that the spectrum be free to lease wholesale and the devices operating under the spectrum be open. Currently many providers such as Verizon and AT&T use technological measures to block external applications. In return Google guaranteed a minimum bid of $4.6 billion. Google's specific requests were the adoption of certain policies
The result of the auction was that Google was outbid by others in the auction, triggering the open platform restrictions Google had asked for without having to actually purchase any licenses. Google was actively involved in the bidding process although it had no intentions of actually winning any licences. The reason for this was that it could push up the price of the bidding process in order to reach the us$ 4.6B reserve price, therefore triggering the open source restrictions listed above. Had Google not been actively involved in the bidding process, it would have made sense for businesses to suppress their bidding strategies in order to trigger a new auction without the restrictions imposed by Google and the FCC. Google's upfront payment of $287,371,000 in order to participate in the bidding process was largely recovered after the auction since it had not actually purchased any licences. Despite this, Google ended paying interest costs on which resulted in an estimated loss of 13 million dollars.
The FCC ruled in favor of Google's requests. Only two of the four requirements were put in place, open applications and open devices. Google had wanted the purchaser to allow 'rental' of the blocks to different providers.
In retaliation, Verizon filed a lawsuit against the Federal Communications Commission to remove the provisions Google had asked for. Verizon called the rules “arbitrary and capricious, unsupported by substantial evidence and otherwise contrary to law.”
filed suit against the FCC on September 13, 2007, seeking to have the rules dismissed on the grounds that the open access requirement "violates the U.S. Constitution, violates the Administrative Procedures Act … and is arbitrary, capricious, unsupported by the substantial evidence and otherwise contrary to law." On October 23, Verizon chose to drop the lawsuit after losing its appeal for a speedy resolution on October 3. However, the CTIA stepped in to challenge the same regulations in a lawsuit filed the same day. On November 13, 2008, the CTIA dropped its lawsuit against the FCC.
The FCC placed very detailed rules about the process of this auction of the 698–806 MHz part of the wireless spectrum. Bids were anonymous and designed to promote competition. The aggregate reserve price for all Block C licenses was approximately $4.6 billion. The aggregate reserve price for all 5 blocks being auctioned in Auction 73 was just over $10 billion.
and AT&T Mobility together accounted for $16.3 billion of the total revenue. Of the 214 approved applicants, 101 successfully purchased at least one license. Despite their heavy involvement with the auction, Google
did not purchase any licenses. However, Google did place the minimum bid on Block C licenses in order to ensure that the license would be required to be open-access.
The results for each of the five blocks:
After the end of Auction 73, there remained some licenses that either went unsold or were defaulted on by the winning bidder from Blocks A and B. A new auction, Auction 92, was be held on July 19, 2011 to sell the 700 MHz band licenses that were still available. The auction closed on July 28, 2011, with 7 bidders having won 16 licenses worth $19.8 million.
Spectrum auction
A spectrum auction is a process whereby a government uses an auction system to sell the rights to transmit signals over specific bands of the electromagnetic spectrum and to assign scarce spectrum resources. Depending on the specific auction format used, a spectrum auction can last from a single...
, officially known as Auction 73, was started by the Federal Communications Commission
Federal Communications Commission
The Federal Communications Commission is an independent agency of the United States government, created, Congressional statute , and with the majority of its commissioners appointed by the current President. The FCC works towards six goals in the areas of broadband, competition, the spectrum, the...
(FCC) on January 24, 2008 for the rights to operate the 700 MHz frequency band in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
. The details of process were the subject of debate among several telecommunication
Telecommunication
Telecommunication is the transmission of information over significant distances to communicate. In earlier times, telecommunications involved the use of visual signals, such as beacons, smoke signals, semaphore telegraphs, signal flags, and optical heliographs, or audio messages via coded...
s companies, including Verizon Wireless
Verizon Wireless
Cellco Partnership, doing business as Verizon Wireless, is one of the largest mobile network operators in the United States. The network has 107.7 million subscribers as of 2011, making it the largest wireless service provider in America....
, AT&T
AT&T
AT&T Inc. is an American multinational telecommunications corporation headquartered in Whitacre Tower, Dallas, Texas, United States. It is the largest provider of mobile telephony and fixed telephony in the United States, and is also a provider of broadband and subscription television services...
, as well as the Internet company Google
Google
Google Inc. is an American multinational public corporation invested in Internet search, cloud computing, and advertising technologies. Google hosts and develops a number of Internet-based services and products, and generates profit primarily from advertising through its AdWords program...
. Much of the debate swirled around the "open access" requirements set down by the Second Report and Order released by the FCC determining the process and rules for the auction. All bidding was required by law to commence by January 28.
Overview
The last transmissions by the incumbent television broadcasters using this spectrum ceased on June 12, 2009 except for LPTV (Low Power TV) stations, which can stay on the air with an analog signal until the winning bidders start operations. Full power TV stations ceased analog broadcasting on June 12, 2009DTV transition in the United States
The DTV transition in the United States was the switchover from analog to exclusively digital broadcasting of free over-the-air television programming...
.
Original usage
The 700 MHz spectrum was previously used for analog television broadcasting, specifically UHF channels 52 through 69.
The FCC has ruled that the switch to digital television has made these frequencies no longer necessary for broadcasters, due to the improved spectral efficiency of digital broadcasts. Thus, all broadcasters will be required to move to channels 2 through 51 as part of the digital TV transition. This reallocation is an ongoing effort; the lower channels of the band, 52 through 59, have been used considerably more for analog and digital broadcasts than the upper channels, 60 through 69, which have been largely abandoned.
Some of the 700 MHz spectrum was already auctioned in Auctions 44 and 49. Channels 54, 55 and 59 were sold and in some areas are already being used for broadcasting and Internet access. For example Qualcomm MediaFLO
MediaFLO
MediaFLO is a technology developed by Qualcomm for transmitting audio, video and data to portable devices such as mobile phones and personal televisions, used for mobile television...
in 2007 started using Channel 55 for broadcasting TV to cell phones in New York City, San Diego and elsewhere.
Auction rules and process
For the 700-MHz auction, the FCC designed a new multi-round process that limits the number of package bids that each bidder can submit (12 items and 12 package bids) and the prices at which they can be submitted, provides computationally intensive feedback prices similar to the pricing approach. This package bidding process (which is often referred to as combinatorial auctions) was the first of its kind to be used by the FCC in an actual auction. Bidders were allowed to bid on individual licenses or on an all-or-nothing bid which could be done up to twelve packages, which the bidder determined at any point in the auction. Doing the auction this way allowed the bidder to avoid the exposure problem when licenses are complements. The provisional winning bids are the set of consistent bids that maximize total revenues. The 700 MHz auction represented a good test-case for package bidding for two reasons. First, the 700 MHz auction only involves 12 licenses: 2 bands (one 10 MHz and one 20 MHz) in each of the 6 regions. Secondly, prospective bidders had expressed interest in alternative packaging because some Internet service providers had different needs and the flexibility would benefit them. The FCC issued Public Notice DA00-1486 adopted and described the package bidding rules for the 700 MHz auction.The FCC’s original proposal allowed only nine package bids: the six 30 MHz regional bids and three nationwide bids (10, 20, or 30 MHz). Although these nine packages were consistent with the expressed desires or many prospective bidders, others felt that the nine packages were too restrictive. The activity rule is unchanged, aside from a new definition of activity and a lower activity requirement of 50%. A bidder must be active on 50% of its current eligibility or its eligibility in the next round will be reduced to two times its activity. Bids made in different rounds were treated as mutually exclusive and a bidder wishing to add a license or package to its provisional winnings must renew the provisional winning bids in the current round.
The FCC placed important rules on public safety for the auction. 20 MHz of the valuable 700 MHz spectrum were set aside for the creation of a public/private partnership that will eventually roll out to a new nationwide broadband network tailored to the requirements of public safety. The FCC offered the commercial licensee extra spectrum adjacent to the public safety block that the licensee can use as it wants. The licensee is allowed to use whatever bandwidth that is available on the public safety side of the network to offer data services of their own.
Google involvement
In an effort to encourage Network neutralityNetwork neutrality
Network neutrality is a principle that advocates no restrictions by Internet service providers or governments on consumers' access to networks that participate in the Internet...
, groups such as Public Knowledge
Public Knowledge
Public Knowledge is a non-profit Washington, D.C.-based public interest group that is involved in intellectual property law, competition, and choice in the digital marketplace, and an open standards/end-to-end internet....
, MoveOn.org, Media Access Project
Media Access Project
The Media Access Project is a non-profit group that promotes the public’s interest before Congress and the US court system. MAP grew out of a 1960’s lawsuit against the United Church of Christ and was eventually formed in 1972 in order to advance the rights of the public wanting to participate in...
, along with individuals such as Craigslist
Craigslist
Craigslist is a centralized network of online communities featuring free online classified advertisements, with sections devoted to jobs, housing, personals, for sale, services, community, gigs, résumés, and discussion forums....
founder Craig Newmark
Craig Newmark
Craig Alexander Newmark is an Internet entrepreneur best known for being the founder of the San Francisco-based international website Craigslist.-Biography:...
, and Stanford Law professor Lawrence Lessig
Lawrence Lessig
Lawrence "Larry" Lessig is an American academic and political activist. He is best known as a proponent of reduced legal restrictions on copyright, trademark, and radio frequency spectrum, particularly in technology applications, and he has called for state-based activism to promote substantive...
appealed to the Federal Communications Commission
Federal Communications Commission
The Federal Communications Commission is an independent agency of the United States government, created, Congressional statute , and with the majority of its commissioners appointed by the current President. The FCC works towards six goals in the areas of broadband, competition, the spectrum, the...
to make the newly freed airways open access to the public.
Prior to the bidding process, Google asked that the spectrum be free to lease wholesale and the devices operating under the spectrum be open. Currently many providers such as Verizon and AT&T use technological measures to block external applications. In return Google guaranteed a minimum bid of $4.6 billion. Google's specific requests were the adoption of certain policies
- Open applications: Consumers should be able to download and utilize any software applications, content, or services they desire;
- Open devices: Consumers should be able to utilize a handheld communications device with whatever wireless network they prefer;
- Open services: Third parties (resellers) should be able to acquire wireless services from a 700 MHz licensee on a wholesale basis, based on reasonably nondiscriminatory commercial terms; and
- Open networks: Third parties (like internet service providers) should be able to interconnect at any technically feasible point in a 700 MHz licensee's wireless network.
The result of the auction was that Google was outbid by others in the auction, triggering the open platform restrictions Google had asked for without having to actually purchase any licenses. Google was actively involved in the bidding process although it had no intentions of actually winning any licences. The reason for this was that it could push up the price of the bidding process in order to reach the us$ 4.6B reserve price, therefore triggering the open source restrictions listed above. Had Google not been actively involved in the bidding process, it would have made sense for businesses to suppress their bidding strategies in order to trigger a new auction without the restrictions imposed by Google and the FCC. Google's upfront payment of $287,371,000 in order to participate in the bidding process was largely recovered after the auction since it had not actually purchased any licences. Despite this, Google ended paying interest costs on which resulted in an estimated loss of 13 million dollars.
The FCC ruled in favor of Google's requests. Only two of the four requirements were put in place, open applications and open devices. Google had wanted the purchaser to allow 'rental' of the blocks to different providers.
In retaliation, Verizon filed a lawsuit against the Federal Communications Commission to remove the provisions Google had asked for. Verizon called the rules “arbitrary and capricious, unsupported by substantial evidence and otherwise contrary to law.”
Lawsuits
After the open access rules were implemented, Verizon WirelessVerizon Wireless
Cellco Partnership, doing business as Verizon Wireless, is one of the largest mobile network operators in the United States. The network has 107.7 million subscribers as of 2011, making it the largest wireless service provider in America....
filed suit against the FCC on September 13, 2007, seeking to have the rules dismissed on the grounds that the open access requirement "violates the U.S. Constitution, violates the Administrative Procedures Act … and is arbitrary, capricious, unsupported by the substantial evidence and otherwise contrary to law." On October 23, Verizon chose to drop the lawsuit after losing its appeal for a speedy resolution on October 3. However, the CTIA stepped in to challenge the same regulations in a lawsuit filed the same day. On November 13, 2008, the CTIA dropped its lawsuit against the FCC.
Auction
The auction divided UHF spectrum into 5 blocks:- Block A: 12 MHz bandwidth (698–704 and 728–734 MHz)
- Block B: 12 MHz bandwidth (704–710 and 734–740 MHz)
- Block C: 22 MHz bandwidth (746–757 and 776–787 MHz)
- Block D: 10 MHz bandwidth (758–763 and 788–793 MHz)
- Block E: 6 MHz bandwidth (722–728 MHz)
The FCC placed very detailed rules about the process of this auction of the 698–806 MHz part of the wireless spectrum. Bids were anonymous and designed to promote competition. The aggregate reserve price for all Block C licenses was approximately $4.6 billion. The aggregate reserve price for all 5 blocks being auctioned in Auction 73 was just over $10 billion.
Results of the auction
Auction 73 generally went as planned by telecommunications analysts. In total, Auction 73 raised $19.592 billion. Notably, Verizon WirelessVerizon Wireless
Cellco Partnership, doing business as Verizon Wireless, is one of the largest mobile network operators in the United States. The network has 107.7 million subscribers as of 2011, making it the largest wireless service provider in America....
and AT&T Mobility together accounted for $16.3 billion of the total revenue. Of the 214 approved applicants, 101 successfully purchased at least one license. Despite their heavy involvement with the auction, Google
Google
Google Inc. is an American multinational public corporation invested in Internet search, cloud computing, and advertising technologies. Google hosts and develops a number of Internet-based services and products, and generates profit primarily from advertising through its AdWords program...
did not purchase any licenses. However, Google did place the minimum bid on Block C licenses in order to ensure that the license would be required to be open-access.
The results for each of the five blocks:
- Block A – Verizon Wireless and U.S. CellularU.S. CellularUnited States Cellular Corporation, d.b.a. U.S. Cellular , owns and operates the sixth largest wireless telecommunications network in the United States, behind Verizon Wireless, AT&T Mobility, Sprint Nextel, T-Mobile USA, and Metro PCS. , they serve about 6.1 million customers in 126 markets in...
both bought 25 licenses each. In this block, Verizon targeted urban areas, while U.S. Cellular bought licenses primarily in the northern portion of the U.S. Cavalier Telephone and CenturyTelCenturyLinkCenturyLink, Inc. is a United States telecommunications firm, headquartered in Monroe, Louisiana. The company, founded as Central Telephone & Electronics Corporation in 1968, later changed its name to Century Telephone Enterprises, Inc. in 1971, and then was called CenturyTel, Inc. from 1999 to 2010...
also bought 23 and 21 licenses, respectively.
- Block B – AT&T Mobility was the biggest buyer in the B block, with 227 licenses totaling $6.6 billion. U.S. Cellular and Verizon bought 127 and 77 licenses, respectively. AT&T Mobility and Verizon Wireless bought licenses around the country, while U.S. Cellular continued with its strategy to buy licenses in northern regions.
- Block C – Of the 10 licenses in the C Block, Verizon Wireless bought the 7 that cover the continuous 48 states (and Hawaii). Those seven licenses cost Verizon roughly $4.7 Billion. Of the other three, Triad BroadcastingTriad BroadcastingTriad Broadcasting Company, LLC is a large owner of radio stations in small and medium markets in the United States with over 40 radio stations. Based in Monterey, California, the company is one of the largest radio station owners after Clear Channel Communications, CBS Radio, Cox Radio, and...
bought the two covering the Alaska, Puerto Rico and the U.S. Virgin Islands, while Small Ventures USA L.P. bought the one covering the Gulf of Mexico.
- Block D – Amid some controversy, no licenses were sold in Block D because the reserve price was not met. The FCC had set the reserve price on the spectrum at $1.3 billion, but the highest bidder (QualcommQualcommQualcomm is an American global telecommunication corporation that designs, manufactures and markets digital wireless telecommunications products and services based on its code division multiple access technology and other technologies. Headquartered in San Diego, CA, USA...
) only bid $472 million. This piece of spectrum remains unsold and has not been scheduled for another auction.
- Block E – EchoStar spent $711 million to purchase 168 of the 176 available Block E licenses. This block, made up of unpaired spectrum, will likely be used to stream television shows. Qualcomm also bought 5 licenses.
After the end of Auction 73, there remained some licenses that either went unsold or were defaulted on by the winning bidder from Blocks A and B. A new auction, Auction 92, was be held on July 19, 2011 to sell the 700 MHz band licenses that were still available. The auction closed on July 28, 2011, with 7 bidders having won 16 licenses worth $19.8 million.
See also
- Electromagnetic spectrumElectromagnetic spectrumThe electromagnetic spectrum is the range of all possible frequencies of electromagnetic radiation. The "electromagnetic spectrum" of an object is the characteristic distribution of electromagnetic radiation emitted or absorbed by that particular object....
- Federal Communications CommissionFederal Communications CommissionThe Federal Communications Commission is an independent agency of the United States government, created, Congressional statute , and with the majority of its commissioners appointed by the current President. The FCC works towards six goals in the areas of broadband, competition, the spectrum, the...
- Frequency allocationFrequency allocationUse of radio frequency bands of the electromagnetic spectrum is regulated by governments in most countries, in a Spectrum management process known as frequency allocation or spectrum allocation. Radio propagation does not stop at national boundaries...
- GSM frequency bands
- IEEE 802.22IEEE 802.22IEEE 802.22 is a standard for Wireless Regional Area Network using white spaces in the TV frequency spectrum. The development of the IEEE 802.22 WRAN standard is aimed at using cognitive radio techniques to allow sharing of geographically unused spectrum allocated to the Television Broadcast...
- Open CommunicationOpen CommunicationIn business, Open Communication can be a term used to describe a concept that anyone, on equal conditions with a transparent relation between cost and pricing, can get access to and share communication resources on one level to provide value added services on another level in a layered...
- Spectrum auctionSpectrum auctionA spectrum auction is a process whereby a government uses an auction system to sell the rights to transmit signals over specific bands of the electromagnetic spectrum and to assign scarce spectrum resources. Depending on the specific auction format used, a spectrum auction can last from a single...
- UMTS frequency bandsUMTS frequency bandsThe UMTS frequency bands are radio frequencies used by third generation wireless Universal Mobile Telecommunications System networks.They were allocated by delegates to the World Administrative Radio Conference held in Málaga-Torremolinos, Spain between February 3, 1992 and March 3, 1992...
- White spaces (radio)
External links
- http://arstechnica.com/news.ars/post/20070815-700mhz-auction-whats-really-up-for-grabs-and-why-it-wont-be-monopolized.html
- http://www.pcworld.com/article/id,136349-pg,1/article.html
- http://gigaom.com/2007/03/14/700mhz-explained/
- http://wireless.fcc.gov/auctions/default.htm?job=auction_summary&id=73 official results
- http://www.dtvanswers.com/
- http://www.pcworld.com/article/187024/fcc_tells_wireless_mics_to_get_off_700mhz_spectrum_band.html
- http://www.christianitytoday.com/yc/2009/mayjun/understandingnewwirelessmics.html