Begin forwarded message:
From: David Josephson <[EMAIL PROTECTED]>
Date: August 20, 2006 11:30:46 AM EDT
To: [EMAIL PROTECTED]
Subject: Re: [IP] Spectrum Gold Rush
Dave, for IP if you like. The policy of spectrum auctions is
seriously flawed, indeed, and has more public policy nightmares in
it than you might imagine. It has been tried here and in the UK and
in both countries has resulted in the bankruptcies of many of the
bidders, and their suppliers. Whole chunks of the spectrum are tied
up, largely unused, because the prices paid were unreasonable. The
tale of the 39 GHz band should be instructive for people looking into
this. All of the source documents are available at wireless.fcc.gov/
auctions/30 ...
29 bidders won 2,173 licenses in May of 2000 for over $4 billion. 2
GHz of spectrum, from 38 to 40 GHz, were sold off in regional
licenses 50 to 200 MHz wide. The major bidders such as Winstar,
Advanced Radio Telecom and Adelphia hoped to establish high speed
connectivity to the premise (Winstar called itself Winstar Wireless
Fiber). The business premise was that there was such pent-up demand
for connectivity that people would pay more than fiber prices for
short microwave hops. Such high frequencies are ideal for hops of 3
miles and less, and narrow beams are possible with small antennas.
But did no one notice that the densely populated areas where this
would be practical already had a glut of dark fiber, providing far
more bandwidth, far more reliably, than could even be imagined over
radio at the time?
Tens of thousands of radios were built by companies like P-Com,
Stratex, California Microwave and others. Prices were in the usual
range of commercial microwave equipment of the time -- $30,000 -
60,000 for a 2-mile link of 45 Mbps capacity. Winstar planned a huge
buildout, and "lit up" hundreds of buildings in cities. I'll skip the
intermediate steps. Today none of the high bidders or major equipment
vendors is healthy, and most are gone. You can buy this equipment on
eBay, much of it still with Winstar inventory stickers, for 1-2% of
the original price. The last I tried to make it work for a local
client, the companies that had bought up the licenses from the failed
original bidders were still asking $50 to $500 per channel, per
month, just for the license. This is contrasted with the usual FCC
license fee of $1580 per channel for a 10 year license for
frequencies in nearby non-auction bands, which still have capacity
nearly everywhere.
FCC is an easy target for scorn, but most of the blame does not lie
there. Through successive administrations they have been tasked with
an absurd mandate, that the "public interest, convenience and
necessity" test of the original Communications Act of 1934 was best
served by allowing the market to set the price for spectrum as if it
were real estate, urban planning be damned. In one instance we have
seen it work -- if you consider the development of the cellular
telephone industry -- but only because the public could be sold on
needing a phone in every pocket. That approach doesn't work in every
case.
--
David Josephson
Begin forwarded message:
From: Brett Glass <[EMAIL PROTECTED]>
Date: August 19, 2006 11:50:00 PM EDT
To: [EMAIL PROTECTED]
Subject: Spectrum Gold Rush
Dave:
For IP, if you'd like. Our wireless Internet service provider,
which has been seeking licensed spectrum for many years, knows how
much spectrum is worth; we know that even the FCC's minimum bid in
its current auctions is too high to allow profitable operation in
many rural regions. But we've consistently been aced out of these
auctions by large "spectrum barons," which bid far more than the
spectrum is worth and then hoard it -- perhaps seeking to drive its
market value up to what they paid by creating scarcity. These same
companies are also forming small "shell" companies so as to obtain
discounts which were supposed to be reserved for small entities
like ourselves. We urgently need licensed spectrum to serve our
customers, but the horribly flawed auction process is making it
unlikely that we'll ever obtain any.
--Brett Glass, LARIAT.NET
----------------
Bidders Convinced of Huge Pot at the End of the Spectrum
By Arshad Mohammed
Washington Post Staff Writer
Friday, August 18, 2006; Page D01
The country's biggest telephone and cable companies, already
fighting a ground war to sell consumers TV, phone and Internet
service, have taken their battle to the air.
Both sides have spent the past two weeks bidding billions of
dollars against one another to buy electromagnetic spectrum -- the
frequencies that carry cellphone calls, TV broadcasts and wireless
Internet access.
While they cannot see, taste or touch what they're bidding on, the
companies can smell profit if they can grab enough of the airwaves
at a government auction.
It is an article of faith in the industry that, over time, more and
more communications will become wireless -- making spectrum a must-
have asset for any company that wants to be a player.
"Spectrum is like money. You never have enough," said Roger Entner,
a wireless analyst at independent research firm Ovum.
But it is a limited resource, and extremely expensive.
The federal government is expected to raise as much as $15 billion
from its current auction. The airwaves up for grabs would be used
to offer fast wireless Internet access and ever-more-elaborate
cellphone service that puts e-mail, music and video into the palm
of your hand.
This auction and another, due to be held by the end of January
2008, are regarded as the last, best chance over the next several
years for companies to acquire "beachfront" spectrum that is
exceptionally well suited for wireless Internet and phone service.
What has been most striking about the Federal Communications
Commission's Advanced Wireless Services auction -- which began Aug.
9 and could last for weeks -- is that satellite TV providers and
cable companies were among the 168 bidders.
Full text at
http://www.washingtonpost.com/wp-dyn/content/article/2006/08/17/
AR2006081701574.html
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