FCC sets Jan. 16 for 700-MHz spectrum auction

Rules call for anonymous bidding to prevent collusion

Public comments are due to the Federal Communications Commission by the end of the month on rules for a Jan. 16 auction of 700-MHz spectrum, which is expected to yield more than $10 billion.

One provision in the proposed rules calls for keeping the identities of the bidders and the amounts of each bid secret until each round of bidding is closed in order to improve competition. The FCC approved the rules in July.

A 32-page notice posted late last week by the FCC includes the Jan. 16 auction date, along with a request for comments on the proposed rules by Aug. 31. Replies to those comments are due Sept. 7. The auction is officially being dubbed Auction 73, and by law, all bidding must be commenced by Jan. 28.

The notice tabulates a summary of more than $10 billion in "reserve prices" for five portions of the 700-MHz band. Reserve prices are the "potential market value" based on several factors, according to the FCC. The spectrum was made available by the freeing up of TV channels in the conversion to digital TV by 2009. The auction's proceeds will go to the U.S. Treasury. Some analysts have said the auction total could reach $20 billion, with an active field of bidders.

Bidding will be done anonymously, which "will serve the public interest by reducing the potential for anticompetitive bidding behavior, including bidding activity that aims to prevent the entry of new competitors," according to the proposed rules. The rules further stipulate that the bidders' names and net bid amounts be withheld from public release until the close of each round of bidding.

Anonymous bidding has been used in prior auctions, but the FCC noted that Auction 73 is different because the FCC will withhold information about bidders "irrespective of any preauction measurement of the likely auction competition." That means that the FCC plans to withhold the amount of a bidder's upfront payments and bidding eligibility until after the close of bidding. Also, it means that a bidder will be told of other bidders with whom they are not permitted to discuss bidding strategies in order to enforce the FCC's anticollusion rules.

Anticollusion has become especially sensitive in Auction 73, since the FCC is trying to promote competition after calls by public interest groups and companies such as Google Inc. for more open networks with nontraditional providers. Google, for example, said that it would be willing to bid a minimum of $4.6 billion for spectrum as long as open networks, devices and applications would be allowed over the spectrum, and that a portion would be provided under a wholesale scheme. The FCC rules approved in late July provided for the open networks, devices and applications, but did not specifically provide for a portion of the spectrum to be offered for wholesale use, a system seen by Google and others as a means for small players to use the networks.

Google would be a newcomer to a spectrum auction, while traditional carriers such as AT&T Inc. and Verizon Communications Inc. are expected to bid and have done so in the past.

One of the five major blocks up for bid is the C Block, with a reserve price of $4.6 billion, by far the largest. It includes two blocks, C1 and C2, where the FCC has ruled that a "more open" network must be provided, presumably to meet demands of open hardware and software of many public interest groups.

"Package bidding" procedures will be required for the C Block, including an auction "designed to facilitate the entry of a new nationwide competitor in C Block," the proposed rules say. The FCC undertook experimental economic testing on alternative bidding designs in 2007 and used recent academic research to incorporate such package bidding. The packages in the package bidding are divided into 12 different Regional Area Economic Groupings. Individual bidders, as well as package bidders, can compete for the C Block, but after several rounds of bidding, it is possible that individual bidders can be combined with package bidders.

For all the blocks of the 700-MHz band, A through E, the FCC is issuing 1,099 licenses.

Copyright © 2007 IDG Communications, Inc.

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