Just another WordPress weblog

The government was looking to raise $12 billion or so through the auction of 700 MHz airwaves. So they must be pleased to know that the bidding reached $11.6 billion at the end of the day on Wednesday. This includes all blocks — the A and B regional licenses, the coveted national C block, and the public safety D block. And yes, bidding is anonymous, so we don’t know who’s in on what. But we do know that despite the bid price, the C block hasn’t yet met its $4.6 billion reserve, which it was previously on pace to meet yesterday.

Here’s the problem. There are basically only three players for the C block: Verizon, AT&T, and Google. Over the summer, Google lobbied to have the C block come with an open access requirement. The FCC acquiesced, though Verizon formally complained about the restriction. They later dropped the appeal, and even launched an open initiative of their own.

But that doesn’t mean they’re any keener on dealing with this open access requirement. If the C block doesn’t hit $4.6 billion, the government can opt to scrap the auction and re-do it. This would carry fewer restrictions — i.e., no more open access.

AT&T is really standing back on this one, as they purchased C block spectrum from Aloha Partners earlier this year. While they’d still benefit from this C block, the pressure is not on them. They can outbid regional companies for A and B block spectrum, and wait for a re-auction of the C block, where they’d probably be competing only with Verizon.

Spectrum expert (whatever that means) Joe Norgaard has an interesting take on matters:

“Google may have to outbid itself to hit the reserve,” said Nordgaard. “But this spectrum is unbelievably valuable. The physics of it make it a once in a 50-year event to be able to get spectrum this valuable at these prices.”

That seems to be the most logical solution. Even if Google doesn’t want to build a network, they can still bid the reserve price. That will make the auction official. Since Verizon and AT&T will never see this valuable spectrum again if they don’t act, it’s likely that they’d get into the bidding. Google can then let them hash it out.

Yes, it’s a risk. They could be stuck with a $4.6 billion tab. But it’s a risk I can see panning out for them.

For more information on the spectrum auction, you can check out the coverage on Prepaid Reviews.

[Information Week]

Share on Facebook | Add to De.licio.us | Digg This! | Technorati