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Will the US 700 MHz auction be remembered for dismembering wireless?

High spectrum price could lead to catastrophe

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Faultline has not covered much of the 700 MHz auction, not wanting to read into it too much, and seeing that it is not yet clear how much of it is directly about networks which carry video or other forms of entertainment, which is our chosen territory.

But now, as it approaches its end, we find that a review of all the content written about it during the past three years shows us that there is a potential series of disasters on the horizon, created by this auction.

It is, after all, only $20bn, and presumably the financial and telecommunications businesses around the US can support an outlay of that type, even if some of it is wasted, undersold, or fails to create a new telecommunications landscape. But the build out costs associated with all that spectrum, when added to the $13.7bn spent on the AWS spectrum sold 18 months ago, means that the amount at stake is likely to be capex and spectrum costs of almost double the two amounts – say $65bn. That’s another matter.

There are two ways to think of this, as money well spent to change the landscape of US wireless communications, or as a future build out burden that might kill many smaller operations and lean back towards monopoly US services.

But there are some disquieting issues that remain unresolved on the latest round of spectrum, and commentators seem to have been billing 700 MHz as “beachfront” spectrum – an expression coined by the FCC – which is a cure-all for every wireless ailment, the biggest of which are bringing broadband data speeds and mobile internet to the handset; bringing entertainment networks to the handset and taking the handset out to the far reaches of the US continent, promising a further reach, and better, more available networks.

But what might it mean instead of that? Here’s a few scenarios that while not contradicting those aims, might also emerge.

  1. The traditional US rural incumbent could be pushed out of business by the reach of the 700 MHz spectrum, with the resulting push towards greater US telecommunications monopoly, not less.
  2. Some buyers of the 700 MHz spectrum (depending on who they are) may find that they have overpaid, and that combined with costs of build out and the rising costs of US debt, that may push them out of contention as a player.
  3. The auction may trigger copycat auctions around the world and set a precedent that has as negative a global affect as the European 3G auctions in 2000.

Rather than go through the various guesses of who may or may not win the different lots of A through E, perhaps it is better to have a think about just how this spectrum may be applied. The auction says that the 700 MHz band licenses can be used for fixed or mobile two way networks or for broadcast only one way, though clearly the unpaired 6 MHz Block E license is designed purely for broadcast. And the networks can be built out in either FDD or TDD technologies, which broadly speaking favor either voice or data, cellular or WiMAX, but which can be used for both. The two applications of two way cellular and mobile TV are both mentioned specifically by the FCC documentation.

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