Hi-tech sees win in FCC auction draft rules

Attaching open access conditions to the spectrum could dissuade a company like Verizon Wireless from aggressively pursuing the block. Current wireless operators like Verizon and AT&T tightly control what devices can be used on their networks. This is seen currently as companies will offer exclusive handsets to their customers, but in the future, different types of devices that haven't yet been developed could be offered to customers on a more open basis.

The draft rule fits in Google's plans. A person familiar with the company's thinking told Dow Jones Newswires that high-level discussions are occurring at the Mountainview, Calif., company over whether to participate in the auction, and on what terms.

Such a move would mark a considerable departure from Google's mainstream business of being a content, rather than network, provider

Besides Google, companies like Ebay Inc.'s Skype Internet phone service, Yahoo Inc. and Intel Corp. have all been lobbying the FCC, but it would seem most likely that Google might actually become involved in the spectrum auction.

It could also help alleviate concerns by content providers that the current dominant network providers, like AT&T and Verizon, could slow down the delivery of their content to customers in favor of their own. These content companies want more regulation to protect what has become known as network neutrality.

The person said that Google could contract out the building of a network to a third-party and then, in effect, act as a traffic cop, leasing use of the spectrum to potential market players who currently find it difficult to get into the broadband market, rather than offering service directly to customers itself.

The draft rules also effectively mark the end of the road for Frontline Wireless, which had hoped to combine some spectrum it acquired through the auction with some that will be controlled by public safety to build a broadband wireless network for use by the country's fire, police and emergency services workers and by commercial operators offering broadband service to the public.

According to the FCC official, Martin failed to include many of the conditions that Frontline, a group backed by former FCC Chairman Reed Hundt, prominent Republican telecommunications lawyer Janice Obuchowski and early wireless entrepreneur Haynes Griffin, had been lobbying for.

In the draft rules, Martin did fulfill part of Frontline's wish list by including a chunk of 10 megahertz of nationally licensed spectrum that would sit adjacent to spectrum already earmarked for control by public safety.

The rules state that whoever controls that spectrum will be obliged to work with public safety to provide the country's first responders with wireless broadband service. The licensee would be able to charge public safety entities for access to the network.

But without a series of other conditions that Frontline had hoped would be attached to the spectrum, Martin, in effect, paved the way for one of the large incumbent providers of broadband service, most likely Verizon or AT&T, to take control of the spectrum.

Verizon is known to be in negotiations with representatives of the public safety community, although details of these negotiations have not been made public.

The rest of the spectrum is to be divided into smaller regional and local licenses that could be bid for by a variety of companies.

The likes of MetroPCS Communications Inc., a provider of broadband service in selected cities across the U.S., as well as a large handful of smaller rural providers of broadband, are known to be keen to acquire spectrum in this area to expand their offerings.

Large companies like Verizon and AT&T could also use these smaller slivers of spectrum to fill gaps in their national footprints.

But the two key decisions by Martin — to pave the way for Google or another new entrant to come into the broadband market, and to close the door on Frontline — are the ones that will garner the most attention.

The auction will sell off arguably the most lucrative spectrum ever to come available to the commercial market. It is coming free as television broadcasters switch to a digital signal in 2009, which requires significantly less airwaves.

The auction is likely to begin in January 2008, and must be completed by the end of June.

Martin's proposed rules won't necessarily form the final structure underpinning the auction, but as chairman, it was up to him to determine the general framework.

He will now seek at least two votes from fellow commissioners and will try for unanimous support from all five.

He can almost certainly count on Republican Commissioner Deborah Taylor Tate, who rarely, if ever, dissents from him.

For the third, he will have to either win the support of the third Republican and newest member of the panel, Robert McDowell, or attempt to appease the Democratic Commissioners, Michael Copps and Jonathan Adelstein.

The final rules should be publicly released by the end of July or early August.

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