Wireless auction yields mixed results for consumers

IDG News Service - The completion of the 700-MHz wireless spectrum auction on Thursday should bring more choice and new types of services for end users, although the results were not as rosy as some observers had hoped for.

For the first time in such an auction, the FCC required winners of some of the spectrum to allow any phone and any application to run on their new networks. These "open access" terms mean that end users should be able to choose from a wider selection of devices, along with new types of Web 2.0 services to run on them.

The change affects mainly Verizon, which won almost all of the licenses that must follow the open access rules. Google entered the auction but did not win any licenses, although its participation was seen by many as way to promote the open access requirement, rather than as an attempt to become a network operator.

Verizon and AT&T, another big winner, will most likely use the spectrum to offer high-speed data services — either mobile or fixed line — which would provide an alternative to cable or DSL Internet services. The networks will probably use the new LTE (Long Term Evolution) cellular technology. Trials could begin by the end of next year, although broad availability probably won't come until 2010 or 2011, said Bill Ho, an analyst at Current Analysis Inc.

The new networks are unlikely to deliver cheaper services for users as some had hoped, however, at least not for a while. The operators will need to pay off the billions of dollars they pledged for the spectrum, in addition to the investment in the new networks. "It won't be cheap right off the bat," said Ho. "At some point, there will be mainstream adoption, and then the price goes down."

Nor did the auction result in completely new types of companies entering the wireless market, which had been another possibility when the auctions were announced. Some said they expected all along that the incumbent operators would dominate.

"The whole thing was set up from them beginning for [the incumbents] to win all the licenses," said Vince McBride, who won just two licenses at the auction, covering only a small geographic area. The big winners in the auction picked up hundreds of licenses.

A former mail carrier, McBride has been trying his luck at FCC auctions since 1996. He said new rules for the auction favored large companies with deep pockets. For example, the FCC shortened the amount of time that the winners would have to build their networks. "All that did was prevent small businesses from coming in. They were scared of the build-out requirements," he said.