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Fitch U.S. Telecom Regulatory Review: 700MHz Auction Looms(Wireless News Via Thomson Dialog NewsEdge) Fitch Ratings expects the upcoming 700MHz spectrum auction by the Federal Communications Commission (FCC) will generate total bids significantly in excess of the reserve price of $10 billion, as discussed in Fitch's Winter 2008 'Biannual Telecommunications Regulatory Register.' On Jan. 24, the FCC is scheduled to start auction 73, which consists of 1,099 licenses across five different spectrum blocks. The 700MHz spectrum is considered superior by many participants in the industry due to its favorable frequency characteristics. Thus, the auction has generated significant interest from traditional wireless operators along with many potential new entrants. As a result, the FCC received a great deal of requests for consideration in the formulation of the rules to govern the auction. The rules the FCC adopted in July 2007 include many items that reflect the need to foster increased competition and benefits for consumers, but also maximize the value of the spectrum for the U.S. Treasury. Beyond the banding and reserve pricing for the auction, some of the more significant points from the FCC rules related to the spectrum to be auctioned include a relatively aggressive stance on open-access and build-out requirements. The large 22MHz C-block to be auctioned has a requirement that the owner allow devices or applications to connect to the network as long as they do not cause harm to the network. Open-access advocates had hoped for mandated wholesale access and net neutrality, but it is likely that more restrictions would have damaged the attractiveness and value of the spectrum block, which has a reserve price of approximately $4.6 billion. The build-out requirements are aggressive and result in a significant coverage requirement in four years, which continues to grow throughout the 10-year term of the license. Failure to meet build-out milestones could result in an operator having the license term shortened or the FCC reclaiming the spectrum. Some rural operators have been critical of both the spectrum banding and the build-out requirements and claim that it will dampen their incentive to participate in the auction. Nevertheless, the FCC indicated that 266 entities filed applications to bid in the auction. Another significant item from the FCC rules for the auction is the establishment of a public/private partnership network in the nationwide 10MHz D-block of spectrum. The winner of the spectrum will be required to build-out a nationwide interoperable broadband network that will be available to commercial and public safety users. Additionally, in times of emergency the public safety users would have priority access on the network. The spectrum block has the most aggressive build-out requirements of all the blocks in the auction. Also, the spectrum winner has six months to complete negotiations with public safety operators for terms related to the use of the spectrum. This is a unique partnership use of the spectrum and will produce interesting challenges associated with implementation. Nevertheless, the reserve price of the D-block of spectrum is $1.33 billion. The relatively close timing of this auction in relation to the advanced wireless service (AWS) auction in 2006 (bids of approximately $13.7 billion) has tempered the interest of some wireless operators who have decided not to participate, most notably T-Mobile USA and Sprint Nextel Corp. However, many new entrants have expressed interest including Google Airwaves, which has committed to bid the reserve price for the C-block ($4.64 billion). The report, 'Fitch Ratings' Biannual Telecommunications Regulatory Register', addresses this topic and others in greater detail, including Universal Service Funding (USF) reform, the new cable ownership cap, and developments in video franchising laws. The report aims to give the reader an ability to evaluate the potential effects of regulatory developments on industry participants. Fitch's 'Biannual Telecommunications Regulatory Register", provides a review of important regulatory developments in the U.S. telecommunications industry over the past six months. Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com, the company noted in a release. ((Comments on this story may be sent to [email protected])) ((Distributed on behalf of 10Meters via M2 Communications Ltd - http://www.m2.com)) ((10Meters - http://www.10meters.com)) Copyright ? 2008 Wireless News |