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Who Will Buy Vacated Airwaves?

November 27, 2008

A major test is approaching quickly for a renewed effort by U.S. regulators to auction part of the airwaves to a commercial entity that must share the spectrum with firefighters, police, and other emergency workers.

The Federal Communications Commission’s new proposal to attract bidders to empty airwaves when television broadcasters switch to digital signals will be forefront at an FCC meeting in mid-December.

Growing doubts remain about whether decreasing the minimum bid requirement and easing coverage requirements can overcome a failed auction effort early in 2008.

The debate is whether a commercial partner can profitably share the airwaves with the public safety groups.

Another major hurdle is a weak economy and scarcity of financing.

“One of the big problems is that we are trying to privatize something that might not have a good return on investment,” said Sascha Meinrath, a research director at the think tank, New America Foundation. “It’s not as if you can profit from saving lives.”

The spectrum-sharing effort has been driven by communication problems between police and firefighters during the September 11, 2001 attacks, during Hurricane Katrina and other national emergencies.

It is one of the last recommendations by the 9/11 Commission to be implemented.

Bi-partisan leaders of the panel wrote the FCC in November, urging the agency to finalize the rules by the end of the year.

“We are deeply concerned that more than seven years have passed since 9-11 without the implementation of a public safety network,” Lee Hamilton and Thomas Kean wrote to FCC Chairman Kevin Martin. “We must not let this opportunity pass.”

The running of the auction will be led by the administration of President-elect Barack Obama, if the FCC agrees on new rules.

AT&T and Verizon Communications, the two biggest U.S. mobile phone providers, controlled a majority of the $19.2 billion auction of the so-called 700 Megahertz airwaves being left behind by television broadcasters.

The spectrum set aside for a commercial partner to share with public safety agencies, is called the D-block.

However, it failed to attract a company willing to meet the FCC’s $1.3 billion minimum bid and other requirements.

FCC Chairman Kevin Martin has put together a new plan with a cheaper price tag of $750 million and fewer restrictions.

A private-public partnership to control the spectrum is far from ideal, but he called it the “best alternative” the FCC now has.

“Other better models would require the government to provide direct resources,” said Martin, a Republican who could soon be replaced by the Obama administration.

Experts say a large infusion of funds from Congress for such a project is not expected.

AT&T and Verizon both criticized the latest auction plan; Verizon said it is unlikely to make the airwaves “sufficiently attractive to prospective bidders so as to ensure or even make likely a successful auction.”

Congress ordered the FCC to auction the airwaves, but tied its hands in mandating the auction process, said Harold Feld, a senior vice president with the Media Access Project.

“They gave the FCC lofty public interest goals and told them not to consider revenue,” which is unrealistic, he said.

Companies believe large costs will be incurred to ensure broader coverage, particularly in rural areas.

Michael Copps, a Democratic commissioner, said he was worried about the ability of companies to cover those costs, given the current financial turmoil.

“Finding money in the hallowed canyons of Wall Street or anywhere else to get this network built makes Indiana Jones’ searchings look like child’s play,” said Copps, who could become acting FCC chairman after president-elect Obama takes office.

The 9-11 Commission members told Martin this month in a letter they are judging the progress.

“We believe the tenure of your term of office will be judged – and should be judged – by a simple test: Did the Federal Communications Commission take effective action to insure public safety access to the broadcast spectrum?,” Hamilton and Kean wrote.

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