Update: FCC receives $4.7B bid for open-access block in spectrum auction

Secret bidder could be Google, Verizon or AT&T

For the first time, a single bidder has surpassed the minimum price in the Federal Communications Commission's auction for the coveted open-access C block of wireless spectrum.

The anonymous bid of $4.7 billion was made this morning, and exceeds the reserve price of $4.6 billion that the FCC required in order to win the C block license in the 700-MHz auction. That license is for a packaged deal providing spectrum in eight regions of all 50 states.

The FCC created the packaged license with special conditions that require the license winner to provide open wireless access to all devices and applications.

Significantly, the $4.7 billion bid, made in the 17th round this morning, was not followed by another higher bid in the 18th round, which concluded at noon. More rounds are scheduled this afternoon and in future days.

Google Inc. had urged the FCC to create the open-access rules and could well be the $4.7 billion bidder, although several analysts have speculated that Google may bid for that license only to ensure some open-access spectrum is created. That theory, espoused by analyst Christopher Larsen of Credit Suisse last week, among others, argues that Google could well drop out of the bidding in future rounds to allow Verizon Wireless or AT&T Inc. to win the license, so they would run the C block and still be bound by open-access rules.

In that scenario, Google and other companies could presumably provide devices operating with the Android open-access platform that is under development and still avoid the expense of creating a network infrastructure or buying network capacity.

But the absence of a bid for the same license in the 18th round to outbid the $4.7 billion bid in the 17th round could pose problems for Google under Larsen's scenario unless the bid is raised in future rounds. The FCC plans to continue several rounds of bidding every day until no more bids are made on any of the 1,099 licenses that are available. That means bidding could last many more days.

Also in the auction, there have been no other bids for the D-block license above the $472 million that was bid in the first round. That bid is well below the $1.5 billion minimum reserve required by the FCC for a block of spectrum that requires the winner to work with public safety officials for a joint public-private safety network. Unless that minimum is met, the FCC may consider other options, including a separate auction at another time.

The 18th round brought the total of provisionally winning bids to nearly $13.7 billion, which is within the $10 billion to $15 billion range that the FCC said was required for proceeds from the entire auction. The bids totaled about $10.2 billion for the first time yesterday in the 14th round.

There was plenty of activity in the 18th round, with 930 new bids cast online. Still, 55 of the 1,099 licenses had no bids on them.

Positive reaction to the emergence of the $4.7 billion bid for the C block came from groups supporting open access, including Free Press, a Washington-based organization working for universal access to communications.

"Today marks a key moment in the future of an open Internet," said Ben Scott, policy director at Free Press. "We have at least one company willing to bet billions on open network. This demonstrates that the marketplace will support open networks in the future just as easily as it supported closed networks in the past."

He said that if open access is good enough for the 700 MHz spectrum, "why not for all mobile networks?"

Christopher Libertelli, senior director of government and regulatory affairs at Skype Ltd., said in a statement that today's bid "demonstrates what Skype knew to be true in February 2007 when we petitioned the FCC to adopt wireless open access rules."

Analysts at Stifel Nicolaus based in Washington issued an opinion that the bidding on the C block is now "likely over" based on bidding patterns, and that the winner is "more likely" to be Verizon, although they could not rule out Google, AT&T or EchoStar.

Copyright © 2008 IDG Communications, Inc.

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