Public-Safety Airwaves Have Just One Suitor

By Cecilia Kang
The Washington Post

Thursday 31 January 2008

An effort to create a nationwide wireless network for firefighters, police and other emergency responders has hit a stumbling block as the Federal Communications Commission's auction for airwaves dedicated for public-safety use has attracted paltry interest from bidders.

The agency hoped to auction off those airwaves to a company that would build a wireless network that could be shared with public-safety groups during emergencies.

But in five days of bidding, the FCC has received just one bid for the public-safety portion of the 700-megahertz airwaves up for public auction. The sole bid, placed the first day of the auction, is for $472 million, far short of half of the agency's reserve price of $1.33 billion.

Bidders' identities will not be disclosed until the auction is complete.

The public-safety portion, called the D block, is one of five chunks of airwaves in the 700-mHz frequency up for auction. Other portions, strictly for commercial use, have attracted the interest of Google, Verizon Wireless and AT&T. The rules stipulate that the winning bidder of some of the most valuable commercial airwaves - those that span the country - must build an open system that allows consumers to access the network using any wireless device or software application.

Those other auctions are attracting new bids and are expected to exceed the FCC's minimum $10 billion price tag. At the end of bidding yesterday, provisional bids totaled $11.57 billion.

Yet the lack of bidding for the public-safety spectrum - considered one of the auction's main public-policy purposes - has concerned lawmakers such as Edward J. Markey (D-Mass.), the chairman of the House subcommittee on the Internet and telecommunications, who called bidding for the D block "disappointing." Markey said that if the auction doesn't meet its reserve price, his subcommittee would look at possibly re-auctioning at a lower reserve price and modifying the conditions placed on the winning bidder.

At stake, he said, is an urgent need to improve the country's ability to respond to disasters and emergencies.

"This spectrum block presents policymakers with the opportunity to simultaneously inject new competition and innovation into the [wireless] marketplace while also assuring first responders that a modern, broadband network will be built for public-safety purposes," Markey said in an interview.

Emergency responders communicate using fragmented and sometimes overlapping airwaves and limited technologies such as walkie-talkies.

An effort to connect all public-safety agencies on the same network has been in the works for about 10 years, and the need for such a system was underscored on Sept. 11, 2001, when emergency response suffered from faulty communications.

Rebecca Arbogast, a research analyst at Stifel Nicolaus, said that after four days of dormancy it is unlikely that the D block auction would receive additional bids.

"If the block doesn't hit the reserve, then the commission is left with a bunch of tough choices," she said, which include setting a new auction for the block at a lower price or accepting the disappointing first bid.
Days before the auction began Jan. 24, things started looking grim when Frontline Wireless, a start-up founded by former FCC chairman Reed Hundt, said it would shut its doors. Frontline had planned to build a high-speed wireless network for public-safety groups and had the backing of Silicon Valley venture capital firms like Kleiner Perkins Caufield and Beyers, but it ultimately failed to come up with sufficient financing to bid on the government's radio-spectrum auction.

With companies struggling to raise capital in the beleaguered credit markets, the pool of potential bidders has shrunk, according to some analysts. And those who have the money to bid are now more likely to go after the strictly commercial portions of airwaves.

"It's a nice big chunk and it's going very, very cheap, but if you are a big player, you aren't going to want to deal with the headache of dealing with public safety," said Patrick Comack, an analyst at Zachary Investment Research.

-------