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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 newsdesk@closeupmedia.com))
((Distributed on behalf of 10Meters via M2 Communications Ltd -
http://www.m2.com))
((10Meters - http://www.10meters.com))
Copyright ? 2008 Wireless News
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