[Infowarrior] - FCC sets airwaves sale rule

[Richard Forno]

FCC sets airwaves sale rule
Tuesday July 31, 5:30 pm ET
By Jeremy Pelofsky
http://biz.yahoo.com/rb/070731/wireless_auction.html?.v=9

WASHINGTON (Reuters) - The Federal Communications Commission on Tuesday
voted to shake up the wireless market by approving a set of ground-rules for
a big airwaves auction that would require the winner to make them accessible
to any cell phone, device or application.

The sale will likely begin in December or January and the government expects
it to raise at least $10 billion. The airwaves are being returned by
television broadcasters as they move from analog to digital signals in early
2009.

The access requirement would apply to 22 megahertz of the 62 MHz of spectrum
to be sold. Two Republican FCC commissioners, who were skeptical of the
idea, stressed it would not apply to existing airwaves held by carriers like
AT&T Inc. (NYSE:T - News) and Verizon Wireless (NYSE:VZ - News; LSE:VOD.L -
News).

The agency stopped short of a broader requirement sought by potential bidder
Google Inc. (NasdaqGS:GOOG - News) that would force the winner to resell
access to its network on a wholesale basis.

Currently, wireless carriers restrict the models of cell phones that can be
used on their networks. They also limit the software that can be downloaded
onto them, such as ring tones, music or Web browser software.

Republican FCC Chairman Kevin Martin, who proposed the access concept,
received support from the agency's two Democratic commissioners. He hoped
the carriers would apply the policy to their existing airwaves.

"I hope that will actually spur a more open platform on this new piece of
spectrum but also make sure that some of the benefits of innovation are then
able to flow to some of the other networks as well," he told reporters.

The FCC suggested a $4.6 billion minimum price for the 22 MHz block of
airwaves. If that price is not reached, the airwaves would be auctioned
again, but without the access requirement, according to the agency.

The spectrum being sold can travel long distances and penetrate thick walls,
making it particularly valuable. The auction, to be done with anonymous
bidding, is seen as a last chance for a major new player to enter the
wireless market.

Stifel Nicolaus analyst Chris King said that while the open access
conditions would be disappointing for service providers, it should not hurt
them in the near term.

"Opening to any device is probably something the wireless carriers didn't
want to see," he said. "I don't think you'll see another nationwide carrier
develop out of thin air."

NO WHOLESALE ACCESS

The lack of a wholesale access provision drew criticism from the agency's
two Democrats.

"Several sophisticated companies and financial institutions have concluded
that wholesale is indeed a viable economic model," said Democratic
Commissioner Michael Copps. "Smaller entrepreneurs deserve an alternate path
to wireless access."

Commercial providers will be able to bid on the 22 MHz in large regional
licenses, as well as additional airwaves broken into smaller individual
market licenses.

A 10 MHz swath of spectrum will be sold to a nonprofit entity for public
safety officials to use but it could be shared with commercial operators.

Supporters of the open-access approach, including Google and some U.S.
consumer groups, say it will spur new competition and innovation in the
market for wireless services.

Google said it would have to review details of the order before deciding
whether it would bid in the auction but praised the decision. "The FCC took
some concrete steps on the road to bringing greater choice and competition
to all Americans."

No. 1 U.S. wireless provider, AT&T, supported Martin's proposal, which would
allow consumers the ability to move their wireless handset from network to
network.

A Verizon Wireless spokesman declined to comment but an AT&T executive said
the decision was a reasonable compromise.

"If Google is serious about introducing a competing business model into the
wireless industry, Chairman Martin's compromise plan allows them to bid in
the auction, win the spectrum, and then implement every one of the
conditions they seek," said Jim Cicconi, an AT&T senior executive vice
president.

(Additional reporting by Peter Kaplan in Washington and Sinead Carew in New
York)